The paper's authors said they hoped to begin a debate about the merits of creating diamond derivatives. Successfully fostering such a market would enable hedging and provide greater price transparency according to the paper, but it also acknowledged industry concerns about damaging the “diamond brand”. It was co-authored by ABN Amro, Tel Aviv-based Bank Leumi, Mumbai-based ICICI Bank and Bloomberg.
Polished Prices partnered with the Reuters and Bloomberg trading platforms to provide wholesale polished diamond prices and indexes in 2004. They are not currently tradable, but the firm has since been promoting the development of derivatives based on them. Emma Muller, a director, said increased price volatility and severe margin pressure were making the industry look more seriously at the prospect of diamond derivatives.
Johannesburg-based De Beers, which controls much of the global market in rough diamonds through its Diamond Trading Company, said it was not involved in the initiative and would not comment on it. Muller said Polished Prices’ paper had drawn technical and more general interest from the industry, although dialogue was still at an early stage.
The week on Risk.net,October 14-20, 2016Receive this by email