Working group to set up diamond derivatives

After a meeting with the International Swaps and Derivatives Association, UK-based cut diamond market data provider Polished Prices is putting together a working group aimed at creating a market in diamond derivatives.

The group will comprise around 10 representatives of financial firms and industry players, and will work primarily towards achieving a tradable index. It will try to establish firm proposals on documentation, including issues such as basket composition and pricing sources, to submit to Isda. None of the group's members have been named.

The move comes after Polished Prices took industry feedback on a discussion paper co-authored by ABN Amro, Tel Aviv-based Bank Leumi, Mumbai-based ICICI Bank and Bloomberg. The paper encouraged debate on the contents of any underlying index benchmark, but specifically proposed a basket with a present value of around $3,000. Ideas for physically deliverable contracts were also mooted, although Polished Prices said these would take longer to produce. The data provider already offers several non-tradable indexes through its website and the Reuters and Bloomberg trading platforms.

Isda said it was too early to comment on its involvement in the project.

(See also: First moves on diamond derivatives)