The Indian Commodity Exchange (ICEX) announced recently that it is planning to launch three future contracts for diamonds. The way of buying diamond futures at ICEX is similar to that at Comex, Nymex and The London Metal Exchange. The monthly contract offers three options, 0.30 carats, 0.50 carats and 1 carats. Surat being the diamond industry’s capital in India, it will be the delivery center of futures.
Stock Broker and Investor Sudip Bandopadhyay said that the diamond futures have failed everywhere in the world due to price non-standardization and opaque pricing system. But, Sanjit Prasad, managing director of ICEX said,
“The futures contract will enhance the global competitiveness of Indian exporters who will be able to create inventory and hedge against price volatility which will improve price competitiveness.” He also said, “Though, we Indians are the largest manufacturers of polished diamonds, pricing is opaque and skewed. With Diamond futures contract, ICEX will empower our Indian Diamond manufacturers to be a ‘price maker’ rather than a ‘price taker'”.
14 out of 15 diamonds in the world are polished in India.
Approval for trading in diamond futures happened from at the end of Indian Government in September and the market regulator Securities and Exchange Board of India (SEBI) gave in-principle approval to Reliance Capital anchored ICEX.
The sellers will be safe guarded to some extent against effect of price fall on the inventory of three to six months that a seller has to bear. Size and quality of specifications of diamonds will be accessible to traders. International Institute of Diamond Grading and Research is in tie up with ICEX to pack the diamonds specified in the contract.