WHAT IS A DIAMOND EXCHANGE?
Despite the similarity in the names, a diamond exchange should not be confused with a stock exchange or commodities exchange. The diamond exchange is a unique institution, developed specifically to support the trade in loose diamonds, and sometimes the trade in other gemstones as well.
A diamond exchange is also often referred to as a “diamond bourse” or a “diamond club.”
By definition a diamond exchange is a club of members who deal in diamonds and/or colored gemstones, and who have agreed to abide strictly by certain rules and regulations when doing business with one another. These rules are contained in the diamond exchange’s statutes and bylaws.
The process by which an individual becomes a member of diamond exchange is rigorous, requiring recommendations and personal guarantees that attest to the fact that a candidate’s integrity and business record are unblemished.
The diamond exchange typically provides its members with a physical space where they can do business with one another. Given the nature of the products that they deal in, namely precious diamonds and gemstones, this space needs to be secure, so as to protect the safety of the members and the merchandise. Also, because the appearance and value of diamonds and gemstones are affected by the way that they reflect light, the diamond exchange needs to ensure that lighting conditions in its facility are uniform and optimal.
Generally diamond exchanges provide members with other essential auxiliary equipment, like scales and/or weighing stations. Furthermore, in the modern diamond and gemstone center, these services are generally extended so as to provide a fully serviced work environment, including diamond grading laboratories, banks and other financial services, secured shipping and logistics, essential government services, restaurants and more.
The heart of the diamond exchange is the trading floor, which generally is comprised of rows of tables, where dealers may display their merchandise to other dealers. Given the inherent value of a diamond or colored gemstone, it is unlikely that any one dealer will hold a full selection of what a buyer is seeking. But when dealers gather together on the trading floor a critical mass is achieved, enabling the buyers to fulfill all their requirements, and at the same time negotiate a fair price.
Not all the diamond exchange’s members may be found on the trading floor. Some may prefer to do business from their offices, which also are located in the secure area of the diamond trading complex. But whether they do business from their offices or from the trading floor, they are still bound by the same rules and regulations as other members.
In the diamond trade the element of mutual trust is sacrosanct. Deals, sometimes running into millions of dollars, are sealed with a handshake and the reciting of the Hebrew phrase “mazal u’bracha,” which means “luck and a blessing.”
But disputes sometimes occur, and within the diamond exchange the mechanism for resolving these in a fair and efficient manner lies with the arbitration boards, where the arbitrators are members who have been elected to fulfill this role. The diamond exchanges’ internal judicial systems are a remarkably effective, and on the rare occasions that that disputes are referred to the civil court systems, the arbitration board decisions are generally upheld.
Recognized diamond exchanges are members of the World Federation of Diamond Bourses (WFDB), which today includes 29 such bodies operating in 21 countries. All of statutes and bylaws of WFDB-member bourses are required to comply with uniform guidelines, and members of any one bourse are entitled to gain access to the trading floor of another, meaning that a diamond exchange member can tap into the complete pool of diamonds and gemstones held at any specific time by all members of WFDB-affiliated institutions. Furthermore, through the WFDB, arbitration board decisions at any one bourse can be enforced throughout the federation.