UOB Kay Hian has joined the Singapore Diamond Investment Exchange (SDiX) - the world's first and only commodity exchange trading in physically settled diamonds - as its first broker.
This gives UOB Kay Hian's clients the ability to trade in the stone, which the exchange is trying to promote as a financial asset class.
The announcement on Thursday marks progress in the development of the exchange, which was launched in July last year to provide a transparency price discovery mechanism for the diamond trade. Prices for diamonds are currently fixed through off-line transactions.
Trading on the exchange had been planned to start in September last year. This, however, was postponed to the second quarter of this year due to regulatory approvals that brokerages had to obtain, its chief operating officer Latika Kundu told BT.
Investors will be able to trade either single large stones or baskets of small investment-grade diamonds which are fungible, meaning they will be identical in cut, clarity and colour and hence mutually interchangeable.
All stones traded on SDiX will be graded by the Gemological Institute of America, and investors who buy single stones will be able to examine the certifications through the platform.
Accredited investor clients of UOB Kay Hian in Singapore, Hong Kong, Malaysia, Indonesia and Thailand will have the same access to SDiX's platform.
UOB Kay Hian senior executive director Esmond Choo said that the partnership creates opportunities for the brokerage's clients to participate in the polished diamond market, which is worth US$22 billion a year.
"For the first time, diamonds can be traded with the security and efficiency expected of any financial asset using the SDiX platform," he said. "We look forward to supporting the development of this marketplace."
SDiX chairman and founder Alain Vandenborre said: "Partnerships with leading institutions such as these underline the rapidly growing demand among investors and investment managers globally for new opportunities in diamond-backed investments."
Prices for polished diamonds have been rising since November amid a shortage of supply. While diamond manufacturers have increased their purchases of rough diamonds and ramped up production this year, it takes three to four months for finished polished diamonds to enter the market, according to Rapaport Group, a network of companies that supports the development of the diamond and jewellery markets.'
This article was first published on March 11, 2016.
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