African capital markets exist in silos, as various exchanges within the continent are often inaccessible to investors outside their home countries. For example, a South African investor who wants to diversify his portfolio away from 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 stocks, it also limits access to capital that has grown by leaps and bounds over the past two years. By reportsAfrica’s major regional bourses have raised more than $80 billion in equity capital markets and $240 billion in debt capital markets.
While local retail apps like Bamboo Y chaka offer US and foreign stocks to individual consumers, they are just as limited as traditional brokers when it comes to helping consumers buy stocks and bonds in different capital markets within Africa. However, there is one startup taking a look at the challenge and aiming to address it with its cross-border multi-asset order routing and market data portal: Ghanaian fintech. SecondSTAX (Secondary Securities Trading and Aggregation Exchange).
The platform, which will allow stockbrokers, asset managers, pension funds and institutional investors to access markets outside their own country, today announces its launch to the public. To bolster its efforts, it has also raised $1.6 million in seed funding from private investors and venture capital firms, including LoftyInc Capital and STEMeIn.
Co-founder and CEO of SecondSTAX Eugene Tawiah brings immense experience to execute such an ambitious project. In addition to spending more than a decade at Goldman Sachs, he has done a number of consulting and technology jobs for financial services and capital markets firms.
In 2018, a landmark event tipped his journey towards building SecondSTAX. That was the year that MTN Ghana, a local telecom operator, went public in the West African country. after raising around $237 million. “I was having conversations with the heads of the trading desks and I had a feeling that during the MTN IPO, even though you had a lot of cash to invest, if you weren’t in Accra, there was no way to access or buy that initial public offering. Tawiah told TechCrunch in a call. “So the concept I had in mind was, if I am staying in Lagos, Nairobi or somewhere else outside of Accra, how do I get access to these offers and can I trade them?”
Tawiah co-founded the company with duke lartey. SecondSTAX provides access to debt and equity securities on multiple African bond and stock exchanges. Similarly, the B2B capital markets infrastructure platform says it will help investment firms outside of Africa that want to invest in emerging and frontier economies on the continent. Investment firms onboard its platform can also hold assets in multiple currencies, reducing the risk of a single currency and reducing the volatility of their returns, whether in Africa or elsewhere, the fintech said.
Explaining 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 circles are made up of institutional investors from developed and African markets, respectively, who are interested in investing in various stocks and bonds available on African exchanges. SecondSTAX is the third circle and acts as a gateway to the fourth circle, the exchanges.
“You have exchanges where securities are traded in each country. Nigeria is a silo, as is Ghana, Kenya, and South Africa, etc. SecondSTAX is effectively the aggregation of these exchanges across the continent. It is that platform that unites them all. 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 touch each of these exchanges.”
According to the CEO, once the fintech infrastructure is up and running, he will consider expanding its capabilities to support B2C investment management applications. Retail investors in and out of Africa will be able to access and trade cross-border stocks and bonds through white-label apps launched by traditional brokers and powered by SecondSTAX or third-party wealth technology apps like Bamboo, HashApp, Robinhood and Hisa.
“We are not distinguishing between runners; they can be bricks and mortar or start-ups. Our potential client base is much broader than one type of institution; As long as the broker has digital play, he can use our infrastructure to access African exchanges.”
The fintech, launched in 2020, is targeting the capital markets of Ghana, Kenya, Nigeria, South Africa, Morocco and Egypt. However, at launch, it will launch in the first two, enabling market order routing for all shares on the Ghana and Kenya exchanges and enabling cross-border trading within both capital markets through their exchange associations. sponsor runners.
Tawiah says the funding will see SecondSTAX launch in additional countries by the end of the year and carry out the activities that go along with it, especially with regards to regulatory and licensing issues. There are also plans to increase the size of its staff and strengthen its technology by developing more features that its customers demand. “We expect that in the next 18 to 24 months, the revenue from these customers will start to have an incremental impact in terms of being able to move from startup mode to a real run concept that generates significant revenue,” added the CEO.