MCX applies for diamond futures trading, awaits Sebi approval

The Indian Commodity Exchange or ICEX has already become the world’s first exchange to start trading of diamond futures contracts in the world recently. ICEX has launched 1 carat diamond futures contract which is world’s first ever such trading. At the recent launch of world’s first diamond future contracts by ICEX, the contract was traded at Rs. 3,279/cent where one cent carries the value of the one-hundredth of a carat. This contract is up for its delivery in the month of November this year.

Now, the largest commodity derivatives exchange for metals and energy that also includes the precious metals, MCX or Multi Commodity Exchange, also wishes to join the league and therefore has also applied for the launch of futures trading in diamonds with the Securities and Exchange Board of India (Sebi).

As per the stock market news, MCX has two options available with them for the settlement price. The first option is to use the prices of SDiX. The MCX will contact the Securities and Exchange Board of India to allow them to use the prices settled on the SDiX. SDiX or the Singapore Diamond Investment Exchange is the world’s first and only commodity exchange which is trading in physically settled diamonds.

The second and the last option that lies with the MCX is to do the polling like ICEX had done to reach the settlement price. It had taken eight to nine months for the ICEX to do the polling of polished diamond prices. This polling prices from the actual market is treated as the benchmark for the settlement of the contract.

MCX had already signed a MoU or memorandum of understanding with Singapore Diamond Investment Exchange for creating the areas of cooperation between the two exchanges.

MCX wishes to launch the diamond futures contract because the exchange is hopeful and positive of the success of the diamond futures trading if at all they are allowed. The commodity exchange believes that the gold is already the most vibrant commodity for trading on the exchange and hence most of the traders who are dealing in gold currently will also deal in the diamond derivatives trading as they will be comfortable in understanding the same.

India is a leading global diamond polishing hub, catering to more than 90% of the world’s polishing market for rough diamonds. India imports rough diamond of value more than 19 billion dollars and exports the polished diamonds worth 24 billion dollars annually.

This diamond futures launch by ICEX came after a lot of effort by the exchange. It took two and a half of constant of persuasion and coaxing where several ministries were approached and convinced about the scope of this contract. We are yet to see such a commodity on the nifty futures index. Since diamond is not a notified commodity, it was important for the exchange to persuade the government officers about the need of such contract. Sebi also took some time to approve the contract as the board had to consult the physical market intermediaries in person.

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Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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