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Ghanaian fintech SecondStocks lets investors access capital markets outside their countries, raises $1.6M • Technology Flow

African capital markets are silos, as the continent’s various exchanges are often inaccessible to investors outside their home countries. For example, a South African investor looking to diversify their 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, but it also limits access to capital, which has grown exponentially over the past two 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 like Bamboo and Chaka 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 Africa’s various capital markets. However, one startup is looking at the challenge and aims to solve 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 allows 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 has also raised $1.6 million in pre-seed funding from private investors and venture capital firms, including LoftyInk Capital and StemIn.

Eugene Tavia, Co-Founder and Chief Executive Officer of SecondStacks brings immense experience to execute such an ambitious project. In addition to spending more than a decade at Goldman Sachs, he held various consulting and tech jobs for firms in financial services and capital markets.

In 2018, a landmark event turned his journey in building SecondStocks. That year MTN Ghana, a local telecom operator, went public after raising about $237 million in the West African country. “I was having conversations with the heads of the trading desks and during MTN’s IPO, even if one had some cash to invest, if you weren’t in Accra, there was no way to access or buy into that IPO,” Tavia told Technology Flow in a call. “So the feeling I have in mind is , if I was in Lagos, Nairobi or any other place outside Accra, how could I get these offers and trade them?”

Tavia Duke co-founded the company with Lartie. SecondSTAX provides access to debt and equity securities on multiple African bond and stock exchanges. Similarly, it said the B2B Capital Markets Infrastructure Platform will assist investment firms outside of Africa who want to invest in the continent’s developing and frontier economies. Investment firms onboarded on its platform can also hold assets in different currencies, thereby reducing single currency risk and volatility in their returns, whether in Africa or elsewhere, the fintech said.

Explaining how SecondStacks works, Tavia says to think of his 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 interested in investing in various stocks and bonds available on African exchanges respectively. SecondSTAX acts as a gateway to third circle and fourth circle exchanges.

“You have exchanges in every country where securities are traded. Nigeria is a silo, similar to Ghana, Kenya and South Africa etc. SecondSTAX is an aggregation of these exchanges across the continent. It is a platform that connects them all together. And then 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.

The SecondSTAX team

According to the chief executive, once the fintech’s infrastructure is complete, it will consider expanding its capabilities to support B2C investment management apps. Retail investors inside and outside Africa can access and trade cross-border stocks and bonds through white-label apps launched by brick-and-mortar brokers and powered by third-party wealth tech apps like SecondStocks or Bamboo, HashApp. Robinhood and Hisa.

“We do not differentiate between brokers; They can be brick and mortar or startups. Our potential client base is much broader than one type of organization; As long as a broker has a digital play, they can use our infrastructure to access African exchanges.

Launched in 2020, the fintech is focusing on capital markets in Ghana, Kenya, Nigeria, South Africa, Morocco and Egypt. However, when launched, it will be the first of the two, enabling the routing of market orders for all stocks on the Ghana and Kenyan exchanges and enabling cross-border transactions in the two capital markets through its sponsor broker partnerships.

Tavia said the funding will enable SecondStacks to launch in additional countries by the end of the year and handle the activities that come with it, particularly around regulatory and licensing issues. It also has plans to increase its staff size and strengthen its technology by developing more features that its clients demand. “In the next 18 to 24 months, we expect the revenue from these clients to become more effective in terms of being able to move us from a startup mode to an actual running concept that generates meaningful revenue,” the chief executive said.

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