The first thing that some may think when they hear about a diamond exchange is a place or organisation that allows members of the public to exchange diamonds they’re no longer interested in. So Mrs X trades her diamonds for that of Mrs Y. But this couldn’t be further from the truth.
There are many diamond exchanges throughout the world and most of these have originated in mainly Jewish communities. The reason for this is mainly historical: members of the Jewish community were only allowed to work in certain industries for many centuries, starting in the 1500s. One of the world’s largest and most well-known diamond exchanges is in Antwerp, Belgium. This makes sense because Antwerp has always been at the forefront of diamonds. It isn’t called the World Diamond Centre for nothing: about 70% of the world’s diamonds come from Antwerp. The other well-known diamond exchange – the Diamond Tower – is in Ramat Gan, Israel.
Diamond exchanges have two main functions: sorting and distribution. A diamond exchange is really a place that acts as a central distribution point. This is where rough diamonds from disparate countries such as South Africa, Russia, and Australia are first sorted and then distributed. Diamond exchanges offer tremendous value to buyers and sellers.
The diamonds fall into different categories based on their shape, colour, clarity, and size. These factors all determine the various diamonds’ value so it is important that the person who sorts the diamonds be as objective as possible. The people who do the sorting need to undergo extensive training as well as background checks to ensure they are trustworthy individuals.
The distribution is the second stage and this is where the sorters sell their precious stones to dealers and manufacturers. Many of the dealers are in charge of cutting and polishing factories. Sorters earn commission on the difference between the buying and selling price of their diamonds. This is generally 10%.
Not all dealers may transact on the Israeli diamond exchange; the only dealers allowed to trade there are the ‘sightholders’ who buy unsighted bundles of diamonds, ie, they have not had an opportunity to look at the diamonds before the transaction.
Author bio:
The Gold Company wrote this article about the inner workings of diamond exchanges