Synthetics: Coming to a Bourse Near You?

RAPAPORT... The rise of lab-grown diamonds might finally be tricklingthrough to the historic heart of the trade: the diamond exchanges.It began last November, when Anoop Mehta, president ofMumbai's Bharat Diamond Bourse (BDB), told Rapaport News some of itsmembers had asked for a rethink of its total ban on synthetics in the complex.The BDB delayed taking action due to "issues" in the market in the last six toeight months, but could hold a vote later this year, Mehta said Tuesday. Meanwhile, the Dubai Diamond Exchange hosted a tender ofrough synthetic diamonds earlier this week - the first of its kind at anymember of the World Federation of Diamond Bourses (WFDB). And in a Hebrew Facebook post on May 7, Yoram Dvash,president of the Israel Diamond Exchange (IDE), announced he had sat down withsenior bourse members to discuss how to approach the lab-grown question.The James Allen effectDvash's move was perhaps inevitable, after James Allenentered the synthetics sector earlier this month. The Israeli trade is a majorsupplier to James Allen through a special arrangement the Israel DiamondInstitute (IDI) has with the e-commerce business that is owned by SignetJewelers. The Israeli trade sold about $30 million of goods to James Allen in2018, according to a spokesperson for the IDI. But the opportunities in synthetics go beyond just oneclient. The category has made headway in the US, though demand is less strongin Europe and the Far East, participants at Dvash's May 6 gathering concluded. Therewere voices for and voices against entering the market, he reported, with somearguing that promoting man-made stones would damage the natural market. It's not clear what form any Israeli market entry wouldtake. The bourse currently bans lab-grown diamonds from its IDE trading floor,and has no plans to change that, Dvash said. It doesn't monitor what goes on incompanies' offices within the rest of the exchange building. "Other members felt we must join [James Allen] in carryingsynthetic stones," he wrote. "A decision was made to continue to investigatethe issue more deeply, and to hold a further discussion in the near future." In the meantime, the IDE plans to tighten its rules toensure that any activity in lab-grown diamonds doesn't lead to undisclosedmixing with natural stones. It wants traders to put a clear mark on the smallenvelopes for diamonds (commonly called "brifkas") to indicate that a stone issynthetic, as well as on invoices, Dvash explained. The bourse will alsoallocate part of its budget to improve segregation of the two markets. The exchangehas approved the budget, and is waiting for its legal committee to finalize theother two provisions.Bourses' independenceBourses have the autonomy to make decisions on these issuesthemselves, so long as they ensure clear differentiation and ethical marketing,noted Ernie Blom, president of the World Federation of Diamond Bourses (WFDB). Recentactions by the US Federal Trade Commission and the Diamond ProducersAssociation have successfully alleviated many of the concerns about lab-grownproducers misleading the public with their marketing, he added."[Bourses] have the right to decide if they want to havelab-grown diamonds on their bourses or not," Blom said. "Whatever theirdecision is, we will basically support it."That gives the diamond bourses freedom to pursue venturesthat benefit their members. The question that remains is whether that willresult in the introduction of synthetics to the trading floor, thus entrenchingthe product in the industry's core.Image: Israel Diamond Exchange. (Shutterstock)