ALROSA To Offer Diamond Futures Contracts on Moscow Exchange

Finance and Trade
26/04/2016 08:56

Russian diamond mining company Alrosa is in talks with the Moscow Exchange to offer investors there the chance to invest in up to $1 billion worth of diamonds, news agency RBK reported on Friday. Sputnik International reports that while rare stones such as blue diamonds are subject to sharp changes in their valuation, other diamonds could offer a more stable investment than precious metals, as their value tends to fluctuate by less than five percent a year. Alrosa spokesman Aleksandr Tikhomirov told RBK that the company intends to offer futures contracts in near colorless or faint yellow diamonds, with a weight of 0.5 – 0.59 carats (5.2 mm diameter) or 1-1.49 carats (6.5-7.5 mm diameter). Investors will be able to buy futures backed by 1/100 of a diamond of the various weights; for example, if a one carat diamond is worth around $8,000 and a 0.5 carat diamond around $2,500, futures in 1/100 of the former will cost about $80, and in the latter $25.

Alrosa will set the prices of their contracts according to global prices, the price set by the Russian Ministry of Finance, and the volume of their own production and sales. Mihail Orlenko, head of the commodities trading department of the Moscow Exchange, told RBK that the option could work if Alrosa is prepared to act as market maker, and maintain the liquidity of the instrument on the market. "Trading diamonds on the exchange could appeal to private investors seeking a new instrument for investment, and jewelers," he said.