World's first diamond exchange will go live in Sep

Set up in Singapore with several large Indian diamond firms as members, Jim Rogers is one of the angle investors

The world's first physically settled diamonds trading exchange, which is being set up in Singapore, will go live in September. Diamonds are usually traded bilaterally and there is no organised place for the same. While retailers or jewellers buy diamonds from those who polish it, consumers usually buy it from the retailers.

The Singapore Diamond Investment Exchange Pte Ltd (SDiX) is being set up by Alain Vandenborre, an entrepreneur who has a controlling stake in SDiX. He has also co-founded the Singapore Freeport (now Le Freeport Management).

SDiX has equity investment from Singapore's sovereign wealth fund Temasek Holdings' fully-owned subsidiary Vertex Venture Holdings and International Enterprise Singapore (IE Singapore), the government agency promoting international trade. Legendary investment guru Jim Rogers and Hsieh Fu Hua are angel investors in the exchange.

The exchange will provide investors an opportunity to invest in diamonds with transparent pricing. SDiX will be a first-of-its-kind business-to-consumer (B2C) platform for physically settled diamonds.

The exchange will have standardised lots of diamonds. All diamonds listed on the SDiX will be graded by the Gemological Institute of America (GIA) with custodial services being provided by Malca-Amit - a global wealth management logistics company. United Overseas Bank is the initial approved settlement bank.

Latika Kundu, chief operating officer of SDIX, said: "We conservatively estimate that in the first year (2016), the turnover would be $250 million, which will include basket lots and single diamonds." Kundu said the target is to double that figure in 2017.

"Two years down the line, the SDIX also plans to launch forward trading and futures trading in diamonds," she added.

A seller will have to deposit diamonds according to standardised lots, after graded and certified by the GIA, in the dedicated physical vaults - one operated by Malca-Amit in Singapore Le Freeport and the second one operated by Malca-Amit within the Bharat Diamond Bourse at BKC Mumbai. Brokers will have to keep security deposits, based on which their trading limits will be decided. They will also have to collect money from buyers and deposit it with the exchange. Trade will be settled in T+3 cycle (three business days after the transaction date).

Around 25 several large Indian diamond companies are 'pioneer members' for the launch, comprising 'approved suppliers' and 'broker members'. They include Paragon Diamonds, Kiran Gems, SRK, Hari Krishna Exports, Rosy Blue, Sheetal Group, Leo Schachter Diamonds, K P Sanghvi, Kapu Gems and UOB Kay Hian, representing participation across six countries - Singapore, India, Hong Kong, the US, Belgium, and the UK.

While many of these companies will be suppliers, buyers will consist of jewellers, retailers and even investors who could be high net worth individuals and corporates.

Kundu said: "Even investors would find it easy and cost-efficient to buy diamonds at wholesale price from the exchange's platform."

Investors now buy diamonds from retailers, where the price is much higher than the wholesale price.

The diamonds that will be traded on the exchange will be round, fluorescence-absent high-quality ones with standard lots. Large single diamonds and brown, green or milky diamonds will not be traded. Initially, trading window will be open for four hours, which will be Asia-centric.