Ghanaian fintech SecondSTAX enables investors to access capital markets outside their countries, raises $1.6M

African capital markets exist in silos as different exchanges within the continent are often inaccessible to investors outside their home countries. For example, a South African investor looking to diversify his portfolio outside of the Johannesburg Stock Exchange may find it difficult to invest in the Nigerian Stock Exchange.

Not only does this limit investors’ access to high-growth securities, it also limits access to capital that has skyrocketed over the past few years. per reportsAfrica’s major regional exchanges have raised over $80 billion in capital markets and $240 billion in debt capital markets.

While native retail applications such as Bamboo and He waits offer US and foreign stocks to individual users, they are as limited as traditional brokers when it comes to helping users buy stocks and bonds in various capital markets in Africa. However, there is a startup that sees the challenge and aims to tackle it with its multi-asset cross-border order routing portal and market data: Ghanaian Fintech SecondSTAX (Secondary securities trading and eXchange for aggregation).

The platform, which will allow broker-dealers, asset managers, pension funds and institutional investors to access markets outside their home country, is announcing its launch to the public today. To bolster its efforts, it also raised $1.6 million in pre-funding from private investors and venture capital firms, including LoftyInc Capital and STEMeIn.

Co-founder and CEO of SecondSTAX Eugene Tavia brings vast experience to manage such an ambitious project. In addition to spending more than a decade at Goldman Sachs, he led various consulting and technical assignments for firms in the financial services and capital markets.

In 2018, a remarkable event tilted his journey towards building SecondSTAX. That was the year local telecoms operator MTN Ghana went public in the West African nation after raising about $237 million. “I had conversations with heads of trading desks and there was a feeling during the MTN IPO that even though you had a bunch of money to invest, if you weren’t in Accra, there was no way you could access or buy into that IPO,” Tavia told TechCrunch during a call. “So the idea I had in mind was, if I stay in Lagos, Nairobi or some other place outside of Accra, how can I access these offerings and be able to trade them?”

Tawiah co-founded the company with Duke Lartaeus. SecondSTAX provides access to debt and equity securities across multiple African bond and stock exchanges. Similarly, the B2B capital markets infrastructure platform says it will help non-African investment firms looking to invest in the continent’s emerging and frontier economies. Investment intermediaries included in its platform can also hold assets in different currencies, thus reducing their risk in one currency and reducing the volatility of their returns, whether in Africa or elsewhere, the fintech said.

Breaking down how SecondSTAX works, Tawiah says to think of his company’s platform as a layer in a series of concentric circles. The first and second rounds consist of institutional investors from developed markets and those in Africa, respectively, who are interested in investing in various stocks and bonds available on African exchanges. SecondSTAX is the third round and acts as a gateway to the fourth round, the exchanges.

“You have exchanges where securities are traded in every country. Nigeria is a silo, same as Ghana, Kenya and South Africa etc. SecondSTAX is effectively the aggregation of these exchanges across the continent. It is one platform that connects them all together. And now as an institutional investor like Goldman Sachs in New York, Bank of America in the UK or a boutique firm in Singapore, they have access to this platform to tap into each of these exchanges.”

The SecondSTAX team

According to the CEO, once the fintech infrastructure is up and running, it will consider expanding its capabilities to support B2C investment management applications. Retail investors within and outside Africa will then be able to access and trade cross-border stocks and bonds through white-label applications launched by brick-and-mortar brokers and supported by SecondSTAX or third-party wealth technology applications such as Bamboo, HashApp , Robinhood and Hissa.

“We do not differentiate between brokers; they can be bricks and mortar or start-ups. Our potential client base is much wider than one type of institution; as long as the broker has a digital play, he can use our infrastructure to access African exchanges.”

The fintech, which launched in 2020, is looking at capital markets in Ghana, Kenya, Nigeria, South Africa, Morocco and Egypt. However, at launch, it will launch in the first two, allowing the routing of market orders for all shares through the Ghana and Kenya exchanges and enabling cross-border transactions within the two capital markets through the sponsoring broker partnerships.

Tawiah says the funding will see SecondSTAX launch in additional countries by the end of the year and carry out the activities that come with that, particularly around regulatory and licensing issues. There are also plans to increase staff and strengthen technology by developing more features that customers demand. “We expect that over the next 18 to 24 months, the revenue coming from these customers will begin to become more impactful in terms of being able to move us from a startup mode to an actual operating concept generating meaningful revenue,” the CEO added.

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