In an attempt to make the precious stone an independent class of financial assets, the Singapore Diamond Investment Exchange (SDiX) will start trading in physical diamonds in September using electronic exchange technology to see prices in real time, and this Will add liquidity to the market.
If successful, the exchange could accelerate Singapore's entry into the trade in physical diamonds in addition to recent attempts to make the city state the center of the gold trade, as stated by IE Singapore, the government trade promotion agency.
Prices for diamonds are currently fixed for offline offline transactions. Alain Vandenborre, chairman of the board of directors with the functions of CEO and chief financier of SDiX, said: "There are no reports of price transactions or the opening of prices, so they are completely opaque and very illiquid."
Precious stones are currently sold mainly to jewelers. Therefore, the exchange will create additional demand through financial investors, he added.
SDiX will offer two types of products: standardized baskets of small diamonds and individual large diamonds. Mr. Vandenborre said that the prices for stones weighing less than one carat are often more volatile and, therefore, are of greater interest to traders; Large stones have over time a higher increase in the cost of capital.
All the diamonds on the exchange will be certified by the Gemological Institute of America (GIA) and will be stored on the Bharat Diamond Bourse in Mumbai, from which SDiX ordered a special real safe. After the stones take part in the auction and will be sold, they will be transferred to the Singapore store Singapore Freeport. Both storage facilities are operated by Malca-Amit, which provides transportation and security services.
First, SDiX will conduct trades from 12.30 to 17.30 with lunch at 2.30 pm for 1 hour. This coincides with the time of trading in India (from 10 to 15 hours), which is the largest center for cutting and polishing in the world.
As members of the exchange, both diamond suppliers and brokers will act, and over 25 of them from six countries have shown interest, including UOB KayHian, which will become a pioneer broker, and players such as Kiran Gems and Rosy Blue.
Approximately half of them confirmed their membership in the exchange; The rest are in the process of registering as members, said Mr. Vandenborre. The exchange will seek to increase the number of members when it starts working.
SDiX hopes to gradually expand its trading hours to cover trading activities in Europe, the US and Japan.
Linus Koh, Chief Executive Officer, said: "The idea is to focus on liquidity as early as possible, and then we will expand it as the market develops."
Mr. Koch used to be the main financier of the Singapore Exchange (Singapore Exchange, SGX), as well as the president and chief operations officer in the already discontinued Singapore Mercantile Exchange.
Although SDiX starts trading in physical diamonds, in two to three years it can expand its activities and engage in futures and other diamond financial instruments.
The stock exchange begins work while reducing the availability of loans for the diamond and diamond industry, which registered last year the world sales of diamonds worth US $ 22 billion. In particular, diamond manufacturers, being under pressure from giant diamond mining companies charging high prices for rough diamonds on the one hand, and large retail chains demanding low prices, on the other hand, struggled to service their debts by abandoning banks , Which reduced the provision of loans or completely withdrew from this business.
One of the private equity investors, David Tice, a former United States fund manager based in the United States with US $ 1.6 billion in fund management experience, said:
The United States is the main retail market for diamonds, but the demand for precious stones has grown faster in recent years in China and India. Therefore, Singapore is "well positioned" to attract the flow of diamonds, said Satvinder Singh, deputy chief executive officer of IE Singapore.
"We are constantly looking for new trade clusters, which we can attract and support in Singapore. We hope that this platform will expand trade in physical diamonds and strengthen Singapore as a center for trade in diamonds - if not all over the world, at least in Asia. "
Listing the strengths of Singapore - open economy, well-established financial center and a reserve of highly educated staff - Mr. Sigh added: "We start quite late to work in the precious metals market, but we definitely have everything necessary to influence."
The controlling interest in the stock exchange belongs to Mr. Vandenborr. Temasek Holdings is the second largest shareholder with a 20 percent stake through its wholly owned subsidiary, Vertex Ventures, which is engaged in venture capital.
http://www.businesstimes.com.sg/energy-commodities/new-exchange-to-help-investors-see-sparkle-in-diamonds
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