Bloombergmarkets

World's First Diamond Futures Exchange Starts Trading in India

  • Contracts to help Indian polishers hedge price risks
  • Exchange has 20 large diamond companies as trading members

Cut and polished diamonds

Photographer: Prashanth Vishwanathan/Bloomberg

The world’s first diamond futures exchange will begin trading in India on Monday, enabling companies in the largest producer of the cut and polished gems to better hedge price risks.

“Indian manufacturers most 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.

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.

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.

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