In a journey that is now approaching its fifth anniversary, attempts by the UK Government to drive change in the fortunes of the London capital market by formally expanding the remit to cover private listings appear to be accelerating. The London Stock Exchange Group is now actively trailing its “Private Securities Markets” which will deliver the legacy markets’ option for periodic auctions to bring together buyers and sellers in unlisted assets. It’s worth caveating that the application process to participate in the preliminary sandbox isn’t scheduled to open before June, so there’s still some way to go before this concept reaches adoption at any level of scale, but one point that’s notable is the intention – at least for now – that the use of a Central Securities Depositary or CSD in a PISCES (Private Intermittent Securities and Capital Exchange System) platform will be optional.
That requirement however will be determined by each market operator, but does the element of choice here serve to undermine the ambition, or will it offer much needed flexibility when it comes to addressing the growing demand for trade in unlisted securities?
1) CSDs shouldn’t be expensive
Arguably this is the single most important point. Modern technology has enabled significant advances in terms of automation, which reduces the processing burden significantly. The cost savings here need to be reflected in the fact that CSDs are providing a utility service, whilst the accompanying providers who are supporting these operations should also be encouraged to deliver services as efficiently and cost effectively as possible.
2) CSDs attract a wider audience
It’s widely acknowledged that many institutions will only invest if the underlying product can be held within a CSD. That in turn means better valuations can be realised, the price discovery process is more efficient and the market as a whole ought to look significantly more credible. Whilst the roll out of PISCES is quite rightly intended to address some of the challenges faced by issuers in traditional public markets, transparency remains important not just for market participants but also if these structures are to be useful in terms of arriving at reasonably accurate valuations for purposes beyond trading including, for example, taxation calculations, and the implementation of efficient share plans for employee retention and engagement.
3) Transitioning to other markets is easier
Whilst some issuers may see these new private market structures as providing a long term home for their securities, the ambition must also be that for many, it provides a platform for further growth and ultimately an accession into a more traditional public market venue. After all, failing to ensure that investment is open to the widest possible cohort is something of a retrograde step. In the UK and elsewhere, we have spent the last 30 years democratising personal finance and investing. The idea that access to ownership of many great new companies should now be restricted to high net worth or institutional investors feels like a step backward.
4) Hybrid options likely exist
The digital first approach adopted by Avenir means that we can seamlessly deploy a range of solutions, each finessed to ensure we deliver the precise solution an issuer wants. Examples of this include an Escrow-based process (TTE/TFE) to facilitate tighter control over the register of members whilst also benefiting from the broader ownership associated with settlement on a CSD or a Direct Settlement on Register approach supported by the necessary financing structure, Avenir can adapt as required. Whether such structures will be permitted under PISCES remains to be determined but flexible approaches to put the needs of shareholders and issuers first do exist and can be deployed
At Avenir Registrars, we will be watching the developments of the PISCES framework with close interest and are looking to engage closely with each of the new market operators as their plans progress. Critically, our platform can accommodate securities held both within and outside of a CSD, with protocols also in place for migrating between the two formats. In an evolving world, we can provide issuers and marketplace operators alike the flexibility they need to succeed, regardless of which path they choose to take.
An amended version of this article originally appeared in the May 2025 version of AIM Journal. You can download a printable version here.