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World’s First Diamond Futures Starts Trading in India

World’s First Diamond Futures Starts Trading in IndiaWorld’s First Diamond Futures Starts Trading in India

The world’s first diamond futures exchange began trading in India on Monday, enabling companies in the largest producer of the cut and polished gems to better hedge price risks. The Indian Commodity Exchange Limited, a Reliance ADAG-anchored platform launched the trading.

“Indian manufacturers mostly require this type of financial product,” said Sanjit Prasad, managing director of the Indian Commodity Exchange Ltd. India carries the price risk of holding huge inventories of cut and polished and rough diamonds, he said, news outlets reported.

The exchange, backed by companies including Reliance Capital Ltd and MMTC Ltd, will start trading in 1 carat/100 cent contracts and will eventually add 50 cent and 30 cent contracts, he said. The futures, two-and-a-half years in the making, followed talks with the ministry of finance and the Securities and Exchange Board of India, Prasad said.

Reliance Capital, part of the Anil Ambani-led Reliance Group, is the largest investor in the exchange.

Indian diamond cutters polish about 14 of every 15 of the world’s gems and imported about 153 million carats of rough diamonds in the financial year ended Mar. 31. Polishers source their gems from De Beers, the world’s biggest diamond producer, and also through direct imports from some producing nations.

Sellers will need to get the diamond certified by the De Beers-promoted International Institute of Diamond Grading and Research and will get credit in electronic form equivalent to the carat deposited, according to the exchange. The exchange has 20 large diamond companies including Rosy Blue (India) Pvt. Ltd. and Kiran Gems Pvt. Ltd. as members and expects about 45 sightholders of De Beers to transact on the exchange platform, Prasad said, Indiainfoline reported.

Out of the 8,013 clients, who registered with the exchange, 5,119 clients participated for the mock trading from August 7 to 11. Total trades during the week stood at 2,664,208.

The exchange has put in place necessary infrastructure to handle deposits, grading and sealing, vaulting and delivery of diamonds as part of its preparation for the formal launch of the diamond futures contracts.

The exchange has kept the trading and delivery size low to attract participation by all types of business units in the value chain including rough importers, brokers, sightholders, traders, processors, suppliers, stockists and retailers like jewelry manufacturers.

The exchange has zeroed in on the city of Surat as the only delivery center as of now with the trading price exclusive of the goods and services tax and other levies.

 

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