According to Antwerp Faces, once bustling hives of activity, the trading halls of the Antwerp Diamond Bourse, or Beurs voor Diamanthandel, are today often only sparsely populated. Diamond trading is taking place, but predominantly in the offices that surround them.
The general assembly of the World Federation of Diamond Bourses, the international diamond trade’s largest representative organisation, gathered from July 11 to July 13 at the Ritz Carlton Hotel in Moscow for the 34th World Diamond Congress. Within less than an hour of being called to order, the body accepted the South Korean Diamond Exchange as its 29th member, Antwerp Facets writes.
As bourses go, the South Korean Diamond Exchange is very much a work in progress. Based in Gyeongju in the east of the country, about a four-hour drive from Seoul, the new organisation is currently developing a state-of-the-art facility, said its president, Jae Kim. With only a handful of members, Kim explained that the establishment of the bourse came in response to the need to provide a secure place for trading diamonds in the growing local market.
With the addition of the South Korean Diamond Exchange, there are now 29 WFDB-affiliated bourses in 22 countries. They report a total membership of about 13,000 diamond dealers, but are estimated to effectively serve the interests of more than 25,000 traders. In addition to the most recent WFDB newcomer, over the past four years bourses from Moscow, Istanbul, Sydney and Panama City have joined the federation. Waiting in the wings is a new bourse in Toronto, which has been established but still has not formally requested WFDB membership.
But as the network of diamond bourses grows, the number of dealers using their diamond trading floors is dwindling. Once bustling hives of activity, these frequently cavernous halls are today often only sparsely populated. Diamond trading is taking place, but predominantly in the offices that surround them.
What is the role of the diamond exchange in the modern era? Due to the enormous technological changes of the past decade, the diamond sector has had to evolve and adapt, as have all other industries. More recently, globalisation, the Internet and instant communications have changed the way the diamond industry does business, but for some time already there has been an increasing move to conducting business from the privacy and comfort of the office, rather than spending time walking the trading floor.
"There has been a move away from the bourse to private offices and that is where you see a lot of business being transacted," said Rene Obbels, president of the Vereniging van Kempische Diamantwerkgevers. "We are seeing that where trading was previously carried out in the exchanges, nowadays a lot of business is done at trade shows all over the world. That's where people from different countries meet and make connections and trade.”
It is largely younger diamantaires who are challenging the trade’s conservative tendencies. Although face-to-face contact and the human element remain a vital part of the diamond business, they insist that there are new ways of conducting transactions. Is there a need to go to a diamond bourse to look for diamonds when a few computer clicks on an online trading platform might be able to produce the exact gem required?
The viability of maintaining a trading floor differs from bourse to bourse. While at some diamond exchanges the floor remains vibrant, at others it has been scrapped altogether. In larger trading centres, like Antwerp, Ramat Gan and New York, there remain a large number of individual brokers who do not maintain their own offices, and so rely of the facilities provided to them by the bourses.
What then is the primary relevance of the diamond exchange in the 21st Century? Apart from providing a secure trading platform for members, its next primary function is judicial. Trade disputes in the diamond industry are often settled quickly by the bourses' arbitration boards. And because judgements at one diamond exchange can be enforced at all other WFDB-member exchanges, members have the security of knowing they can trade safely and with a back-up against transgressors.
Today, since trading is an international business, discussions are being held to formalize an international arbitration process under the auspices of the WFDB. This issue was the subject of heated debate at the 34th World Diamond Congress in Moscow, and decisions were made that will enable the process.
"One of the main strengths of the bourses rests in the judicial function," said David Wahl, president of the Antwerpsche Diamantkring. "A member of a bourse who transgresses and is found to be in contravention of the rules cannot trade in another exchange anywhere in the world. The ability to take sanctions is a very powerful aspect of the role of diamond exchanges. And in Belgium, the courts accept decisions of the diamond bourses where disputes arise."
Willy Rotti, president of the Diamantclub van Antwerpen, agreed that the power the bourses have in acting together to prevent members who have broken bourse rules from trading abroad is crucial. "Diamond bourses still have an important role to play, particularly from the legal point of view. If someone transgresses in a particular WFDB-related bourse then he can be prevented from trading in every other member bourse."
Wahl also pointed to another vital aspect of the work of diamond exchanges in supervising the work of Kimberley Process Certification Scheme, which is the system designed to prevent diamonds financing conflict from entering the legitimate trade. "The diamond bourse also plays an important role in the functioning of the Kimberley Process. We ensure that the rules are being followed," Wahl said.
But can the bourse remain relevant as its trading floor dwindles in significance? There is little doubt that diamond exchanges across the globe need to change in order to stay relevant to their membership, said Wahl. "Diamond exchanges must adapt to the changing world by taking new initiatives. There is no doubt that bourses need to change to remain relevant to their membership."
Rotti feels that the bourses have to improve communication with their members, to consult with them about what they want and how service can be improved and business expanded. "Bourses need to adapt and can carry out new functions as we saw with the Antwerp Diamond Trade Fair at the Beurs voor Diamanthandel last February. More than 100 diamond buyers from all over Europe were invited to see what Antwerp diamantaires could offer them and in a very concentrated period they were given full access to the diamond trade in Antwerp. This is what we need to see at bourses if they are to retain their relevance in the modern era.”
Meanwhile, World Federation of Diamond Bourses President Avi Paz believes the role of the diamond bourse and its trading floor remain as relevant today as they were in the past. Since diamonds are much more than just a stone, diamantaires still want to be able to trade with people face-to-face and to see, touch and feel the gemstone, he said, pointing out that electronic trading was still a very small part of overall business.
"You can buy anything over the Internet based on simply a description," Paz said. "You could buy a beautiful painting without actually seeing it, but you would not want to since you actually have to see it in front of you and get a feeling for it. The same applies to diamonds. We do not deny that this new form of trading exists; it is part of the 21st century and we need to be aware of that. It is possible that smaller diamonds of 1-3 carats can be bought electronically, but not larger diamonds.”
"The trading floor fulfils a crucial role since it provides a forum for discussion and debate. Diamantaires trade information, not just about specific diamonds, but about what is happening in the industry and the latest developments. Although you can sit in an office and do business, you need to go out to the bourse floor to meet people and find out what is happening," Paz said.
