Anil Ambani-promoted Indian Commodity Exchange has completed a week of mock trading on its diamond contract with the participation of 5,119 clients of the 8,013 registered with the exchange.

The mock trading, which ended on August 11, registered 26.64 lakh trades with an average daily turnover of ₹3,590 crore; the highest turnover was ₹7,855 crore. The exchange is set to go live in the next fortnight.

Sanjit Prasad, Managing Director and CEO, ICEX told BusinessLine that the pre-launch mock trading was intended to demonstrate the robustness of the exchange’s system, help brokers and clients have a hands-on experience of the features and processes, and educate participants about the price discovery and hedging mechanism.

All systems go

The mock trading session inspired confidence in the capabilities of the exchange to conduct trading and settlement operations, he added. The diamond contracts of one carat (1,000 cents), half a carat and 30 cents will be available for trading to enable people to buy diamond in small quantities at the wholesale price, which are 25-30 per cent lower.

ICEX has enrolled 20 large diamond companies, including Kiran Gems, Rosy Blue Diamond and Dharmanandan Diamonds as members, and expects 40-45 sightholders of De Beers to trade on the exchange as clients.

A seller on the exchange has to get the diamond certified by the De Beers-promoted International Institute of Diamond Grading and Research (IIDGR) and will get credit in electronic form equivalent to the carat deposited. Buyers with open position during the deliverable period can accumulate diamond in small carat in demat form till it reaches one carat and take delivery from Surat.

After taking delivery of the diamond, buyers can use and then sell it back on the exchange if they can afford to bear the cost of $100 a carat charged by IIDGR for certification.

Financing option

The exchange expects its diamond prices to become the benchmark as there are no diamond contracts traded on any exchange platform globally.

The diamond contract traded on the exchange can provide a lifeline to numerous small-scale cut-and-polish industry units who are perennially short of working capital as banks have trimmed their exposure to this sector.

By hedging on the exchange, cut-and-polish units can raise funds by pledging the electronic credit given by the exchange in their demat account. This will work similar to bank lending against warehouse receipt, says Prasad.

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