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Industry task force to address diamond derivatives

July 03, 2007

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Antwerp, Belgium—The Antwerp World Diamond Centre (AWDC) will sponsor an industry task force to look into issues related to developing diamond derivatives.

The announcement comes after diamond-industry representatives and financial experts held a session here last Thursday to discuss the issue. This follows the reporting of a closed-end fund of $400 million for diamonds worth $1 million, introduced by financial players outside the industry, and the introduction of a futures proposal from Martin Rapaport, chairman of the Rapaport Group.

The closed daylong session, held at the AWDC headquarters and sponsored by PolishedPrices.com, included trade representatives from both large and small diamond companies, and financial experts such as ABN Amro Bank, Cargill and Chicago Board of Trade.

Several key points were outlined in a press briefing following the session including: a belief that derivatives are inevitable, that an objective and independent price source is essential, that there is a significant lack of understanding about the concept of derivatives in the diamond trade, that derivatives are mainly geared toward the banking business as a primary driver, and that while there is skepticism about physical delivery, there is more comfort about derivatives trading on an index.

The task force will address these and other issues.

"The task force will be looking at these matters as well as other issues such as governance," AWDC chief executive officer and session participant Freddy J. Hanard said in a statement. "A serious effort has to be done in explaining to the trade the advantages and disadvantages of diamond derivatives."
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