Explanatory note

These Regulations provide for the testing of the efficiency and effectiveness of a new kind of share-trading system, the Private Intermittent Securities and Capital Exchange System, or PISCES. The PISCES sandbox is a financial markets infrastructure (“FMI”) sandbox provided for at sections 13 to 17 of the Financial Services and Markets Act 2023 (c. 29). FMI sandboxes provide for the testing of new or developing technologies or practices in FMI activities, and for the testing of whether or how relevant enactments should apply to the operation of a those new technologies or practices.

Regulation 3 explains what a PISCES is and specifies the type of FMI activity that may be carried on in the PISCES sandbox arrangements, and identifies the FCA as appropriate regulator.

Regulation 4 lists the types of FMI entity that are eligible to apply to participate as a PISCES operator.

Regulation 5 specifies the other categories of person that may participate in the PISCES sandbox.

Regulation 6 makes further provision about which individuals can participate in a PISCES as buyers of shares through their connection with a PISCES company, which is a company that is to have its shares traded on PISCES, or its group.

Regulation 7 requires financial intermediaries (as defined in regulation 5) to satisfy themselves, before placing a buy order received directly from an investor, that the investor comes within one of the categories of specified investor listed at regulation 5.

Regulation 8 prevents the placing of orders that would allow PISCES companies to buy or sell their own shares.

Regulations 9 and 10 specify the procedure by which a person who is eligible may apply to the FCA for approval to operate a PISCES, and set out the FCA’s powers in respect of applications and approvals, including powers to impose conditions, limitations or restrictions on the PISCES operator.

Regulation 11 confers powers on the FCA to modify, suspend or cancel a PISCES operator’s approval.

Regulation 12 provides that the relevant enactments specified in Schedule 1 have effect with the modifications specified in that Schedule in relation to the FCA and to the persons participating in the PISCES sandbox.

Regulation 13, together with Schedule 2, provides for a liability regime in respect of information disclosed in connection with trading on a PISCES.

Regulation 14 confers powers on the FCA to make rules (as well as powers to waive or modify rules) applying to PISCES operators and sandbox participants for the purpose of implementing and operating the PISCES sandbox arrangements.

Regulation 15 provides that the FCA may modify technical standards for the purpose of implementing and operating the PISCES sandbox arrangements.

Regulation 16 requires the FCA to maintain arrangements for the operation of the PISCES sandbox arrangements including monitoring and supervision of PISCES operators, provides a power of direction for the FCA over PISCES operators, allows the FCA to publish PISCES approval notices (defined in regulation 10(3)), and requires the FCA to publish details of the PISCES sandbox arrangements among other things.

Regulation 17 provides a power for the Treasury to impose restrictions on the overall activities of a PISCES operator within the PISCES sandbox.

Regulation 18 amends the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005/1529) so that PISCES companies are treated as unlisted companies for the purposes of that Order.

Regulation 19 specifies the date by which the report on the sandbox arrangements required by section 14(2) of the Act (which is to be laid before Parliament under section 14(4)) must be prepared.

Regulation 20 specifies the date on which these Regulations are to cease to have effect.

Schedule 1, contains modifications to the following relevant enactments, for the purposes described in regulation 12:

• Part 1: the Financial Services and Markets Act 2000 (c. 8);

• Part 2: the Companies Act 2006 (c.46),

• Part 3: the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges, Clearing Houses and Central Securities Depositories) Regulations 2001 (S.I. 2001/995),

• Part 4: the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005,

• Part 5: Regulation (EU)600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments,

• Part 6: Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC, which is disapplied entirely, and

• Part 7: Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.

A de minimis impact assessment of the effect of this instrument is available from HM Treasury, 1 Horseguards Road, London SW1A 2HQ and is published alongside this instrument on www.legislation.gov.uk.