ICEX to start mock trading for first-ever diamond futures from Monday

ICEX's diamond futures will mean that price discovery for diamonds will now happen outside India

Paving the way for launch of diamond futures trade, the Reliance ADAG-anchored Indian Commodity Exchange (ICEX) is commencing mock trading on Monday, to create awareness among existing and potential participants in the commodity value chain.

The mock trading is to continue for five days. It is aimed at addressing issues and doubts on such trade. Actual trading is likely from the end of August or the first week of September. 

The exchange will begin trading sessions from noon, with a pre-open session extending a maximum of 20 minutes. The mock trading session will continue till 7 pm.

“Mock trading will help diamond processors, traders and dealers to understand and experience price hedging methodology, by practically doing it in a near-live environment,” said Sanjit Prasad, chief executive officer at ICEX. The diamond industry consists of manufacturers or ‘diamantaires’ (the term for owners of cutting and polishing units), wholesalers, traders, brokers, retailers and jewellery fabricators. They are all expected to utilise the platform for hedging their physical trades. And, to make it a better price-setter of the commodity. 

Surat is considered the global centre for diamond cutting and polishing. Around 90 per cent of ‘rough’ diamonds mined globally are sent here for assortment and then its distribution among members in the value chain. 

Bharat Diamond Bourse in Mumbai is where most physical diamond trade takes place. 

ICEX is promoted by a public-private partnership. There are public sector units MMTC, Indian Potash, Kribhco and IDFC Bank; the Reliance Group is anchor investor.

There will be three separate monthly contracts of diamonds, having lot sizes of a carat, 50 cents and 30 centsm with compulsory delivery in electronic units. The seller will have to deliver diamond stone at the ICEX platform after getting it certified with the exchange-designated certifying agency for quality checks. Upon certification, the physical stone will be deposited in the exchange-appointed vault at Surat.

Once the stone is deposited, electronic units equivalent to the weight will be created and transferred into the account of the seller. At the time of contract expiry, the electronic units shall be delivered at the exchange platform. The buyer shall get electronic units in his account at the time of expiry. For the delivery of stone in physical form, the buyer has to accumulate the units’ equivalent to the stone size in the contract.

ICEX is creating entirely a new market, where sellers can offload their certified quality diamonds among different sets of buyers. The launch of diamond futures trading on ICEX will mean the price discovery of diamonds will now happen out of India, and based on the demand and supply.