In Russia, futures trade now in diamonds

The plan is to trade in standard diamonds, weighing 0.5 and 1 carat.

The plan is to trade in standard diamonds, weighing 0.5 and 1 carat.

Yuri Smityuk/TASS
Diamonds are set to become an investment instrument in Russia. The Moscow Exchange is set to start trade in the precious stones, like oil: through futures contracts.

ALROSA, Russia’s biggest diamond company, and the Moscow Exchange are working on a project to set up trading in investment diamonds and contract futures on them (a form of contract that sets the timeframe and price for selling a commodity).

Mikhail Orlenko, head of the Moscow Exchange commodities department, believes the project would interest both private investors, who would get a new investment instrument, and jewellers.

Diamonds are more stable

The plan is to trade in standard diamonds, weighing 0.5 and 1 carat. Alexander Tikhomirov, deputy head of ALROSA’s department for client policy and marketing, explained that a diamond weighing 1 carat costs around $8,000, while a 0.5-carat stone would fetch about $2,500. Futures would be linked to 1/100 of a diamond; meaning, a futures contract would cost approximately $80 and $25, depending on the size of the stone.

Diamond prices are more stable than prices of precious metals: their value fluctuates by around five percent a year, said Daniil Kubsky, head of exports at the Israeli diamond producer David Levy Polished Diamonds. It is only rare stones, like blue diamonds, that are subject to a sharp fluctuation in prices. Five years ago, a large blue diamond weighing around 10 carats was sold for almost $1.5 million per carat, while in 2015, the price shot up to $4 million per carat.

Existing diamond trading platforms

The best-known trading platforms for diamonds are the Israel Diamond Exchange, the Antwerp Diamond Bourse and the Bharat Diamond Bourse in Mumbai. These are, in effect, the large markets where jewellers can buy diamonds.

Additionally, there are also electronic platforms. According to Maxim Budyak, managing director of Diamond Trade Rus, the two biggest of them are IDEX (it has a diamond inventory of 0.7 million pieces worth $5 billion) and Rapnet (1.16 million diamonds worth $8 billion).

Based on RBC materials.

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