With the launch of an electronic trading platform for diamonds – the first in the world at that – the Singapore Diamond Investment Exchange hopes to make diamond trading more accessible. For centuries, diamonds have been priced and sold at “bourses” in Antwerp, Tel Aviv and Mumbai usually by individual contracts. Much of the stones that pass through deal houses like these make their way to jewelry stores. The newest trading platform of the Singapore Exchange could change that by bringing real-time pricing and liquidity to the market. However, lessened demand for luxury goods and the lack of investor knowledge in the diamond market is also a threat.
Alain Vanderborre and Linus Koh are among the founders of the Singapore Diamond Investment Exchange. Vanderborre, who serves as Chairman, once set up a maximum-security free-trade zone located at the Changi Airport. Koh, on the other hand, who serves as CEO was the former finance chief at the Singapore stock exchange.
Speaking to Barron’s Asia, Vandenborre says the objective of the Singapore Diamond Investment Exchange is to have diamonds recognized as a commodity. Through the exchange, investors can trade stones with registered brokers in different locations, including Singapore, Hong Kong and Dubai. All the trades will be backed by diamonds that are stored in vaults. Investors will be able to pay the exchange to store the gems and withdraw them.
The exchange will only trade in diamonds that have been extracted from mines and turned into polished stones. According to Vandeborre, of the $25 billion worth of polished stones, only 3% are bought as investment. The diamond investment market is also usually restricted to stones that are big and unique which sell for millions at auctions. Not only that, diamond pricing is also peculiar as factors such as clarity and quality of cut determine its value.
For Vandeborre and Koh, the exchange will trade diamonds in baskets of three, six or ten stones totaling 3.1 carats. Each basket will contain only “investment-grade” diamonds which have been certified as authentic b the Gemological Institute of America.
The Singapore Diamond Investment Exchange has been operating since May 2016 and total trading volumes hover close to $1 million. While not a lot, Vandeborre says the platform is still in its early stages.