Rapaport Group, a New York-based provider of diamond prices, is seeking approval from the US Commodity Futures Trading Commission (CFTC) to start the world’s first diamond-futures contracts.
Rapaport wants to set up an exchange in New York that will also offer options contracts based on gem prices, chairman Martin Rapaport said in a telephone interview on 8 June.
“If you can trade oil and pork-belly futures, you can do the same for diamonds,” Rapaport, 55, who has been following the industry since 1976, said from Tel Aviv. “We are seeing the commoditization of diamonds.” Futures are contracts for delivery of a security at a specified time in the future at an agreed price.
Diamond prices have risen as demand for the gems in the US, the biggest market, as well as China and India outpaces supply from new mines. The price of a top-quality one-carat diamond has climbed 6.6% to $6,632 since the beginning of 2005, according to the Rapaport Diamond Trade Index.
Rapaport Group plans to start inviting offers in September for top-quality one-carat gems, which will be graded by the Gemological Institute of America, an independent assessor of diamonds for Tiffany & Co. The diamonds, guaranteed by Rapaport Group, will be held in New York, where they will be available for inspection, Rapaport said. The group will start an index that will initially be based on monthly diamond prices, Rapaport said. The index will form the basis for the CFTC-approved futures contracts, he added. The company already provides an assessment of diamond spot prices.
Rough, or uncut, diamonds don’t trade on commodity exchanges. De Beers, the world’s biggest diamond company, holds 10 sales a year, known as sights, to a select group of customers called sightholders from countries known for diamond cutting, including Belgium and Israel. Smaller rivals also use similiar methods.
There will be no limitation on where the diamonds come from, Rapaport said. “You can’t put constraints on a free market.”