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ICEX launches world’s first diamond futures contracts

The Indian Commodity Exchange (ICEX) launched the world’s first diamond futures contracts on 28 August 2017 to provide exporters with a hedging tool. India is a global diamond polishing hub where 14 out of every 15 rough diamonds in the world are polished. At the launch, the first diamond contract for delivery in November was traded at Rs 3,279/cent. One cent is the one-hundredth of a carat (ct).

With over 103 registered members so far, ICEX has launched 1 ct diamond futures contract for delivery in November and followed by contracts with monthly settlements. 50 cents and 30 cents contracts will be introduced after making the initial contract successful. The 1-carat contract for expiry in November, December and January will have delivery centre at Surat.

The journey for diamond futures launch started over two and a half years ago with approaching several ministries to convince about the potential of this contract. With diamond not being a notified commodity, it was important for the exchange to convince the government officials about the need of such contract. Diamond was notified as a commodity for derivatives trading on online exchanges. Convincing ICEX Board was also a challenge. The Securities and Exchange Board of India (Sebi) has approved the contract after lots of consultations with the physical market intermediaries.

ICEX has been polling polished diamond prices for over 8-9 months for the settlement of the contract. Polling prices from the physical market would be used as a benchmark for the settlement of the contract. Price variation would be Re 1 with an initial margin of 5 per cent on value at risk (VAR) basis.