Ghanaian fintech SecondSTAX lets investors access capital markets outside their countries, raises $1.6M • TechCrunch

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.

This not only limits investors’ access to high-growth securities, but it also limits access to capital that has grown by leaps and bounds over the past couple of years. According to reports, major regional exchanges in Africa have raised over $80 billion in equity capital markets and $240 billion in debt capital markets.

While local retail apps such as Bamboo and Chaka offer US and foreign stocks to individual consumers, they are as limited as traditional brokers in helping consumers buy stocks and bonds across different capital markets in Africa. However, there is one startup taking a look at the challenge and aiming to tackle it with its cross-border order routing and multi-asset market data portal: Ghanaian fintech SecondSTAX (Secondary Securities Trading and Aggregation eXchange).

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

SecondSTAX co-founder and CEO Eugene Tawiah has vast experience running such an ambitious project. In addition to spending more than a decade at Goldman Sachs, he held various consulting and technology jobs for financial services and capital markets firms.

In 2018, a landmark event tipped his journey to build SecondSTAX. That was the year MTN Ghana, a local telecom operator, went public in the West African country after raising about $237 million. “I had conversations with heads of trading desks and there was a feeling that during MTN’s IPO, even if you had a lot of money to invest, if you weren’t in Accra, there was no way to access or buy into that IPO. ,” Tawiah told TechCrunch during a call. “And so the concept I had in mind was, if I lived in Lagos, Nairobi or anywhere outside Accra, how do I access these offers and be able to trade them?”

Tawiah co-founded the company with Duke Lartey. SecondSTAX provides access to debt and equities across multiple African bonds and exchanges. Likewise, the B2B capital markets infrastructure platform says it will help non-African investment firms looking to invest in emerging and frontier economies on the continent. Investment firms onboard their platform can also hold assets in different currencies, thereby reducing single currency risk and reducing the volatility of their returns, whether in Africa or elsewhere, the fintech said.

Breaking down how SecondSTAX works, Tawiah says he thinks of the company’s platform as a layer in a series of concentric circles. The first and second circles 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 stock exchanges. SecondSTAX is the third circle and acts as a gateway to the fourth circle, the exchanges.

“You have exchanges where the securities are traded in each country. Nigeria is a silo, same with Ghana, Kenya and South Africa etc. SecondSTAX is effectively the aggregation of these exchanges across the continent. It is the one platform that connects them all. And now as an institutional investor like Goldman Sachs in New York, Bank of America in the UK, or a boutique firm out in Singapore, they have access to this platform to touch 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 apps. Retail investors in and outside Africa will then be able to access and trade cross-border stocks and bonds via white-labeled apps launched by brick-and-mortar brokers and powered by SecondSTAX or third-party wealth technology apps such as Bamboo, HashApp, Robinhood and Hisa.

“We do not differentiate between brokers; they can be brick and mortar or startups. Our potential customer base is much wider than one type of institution; as long as the broker has a digital game, they can use our infrastructure to access African exchanges.”

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

Tawiah says the funding will see SecondSTAX launch in more countries by the end of the year and carry out the activities that go with it, particularly regarding regulatory and licensing issues. There are also plans to increase the number of employees and strengthen the technology by developing more functions that customers demand. “We expect that over the next 18 to 24 months, the revenue coming from these customers will begin to be incrementally impactful in terms of being able to shift from start-up mode to an actual driving concept that generates meaningful revenue,” the CEO added.