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Rapaport's Diamond Futures Market Failure Not Unexpected
Is it no wonder that Rapaport's Diamond Auction did not fair so well out of the gate? All lots had a set reserve which was unknown to the buyer's so the bidders were essentially "left in the dark".
Out of 210 lots, Rapaport sold only 27 lots. A paltry sum when one considers the "hype" surrounding this international event.
As quoted by Martin Rapaport..."I think, overall, it's quite disappointing to sell 27 lots out of 210," Rapaport said via a media teleconference at the close of the auction on Thursday. "In general, I would say we would have liked to see more parcels sold, greater pricing and people willing to pay more for the goods."
"A lot of bids came in within a relatively close margin to the reserve price. But we did this very, very strictly. It was very important for us to run this first auction with absolutely no controls and no limitations," he said. "I think we'll probably be disclosing the reserve prices because the idea was for people to be able to build momentum in the bidding like they do at Christies, Sotheby's and other large auction houses. But I think on the Internet it was pretty frustrating for people because they didn't know what the reserve price was."
Sticker Shock...Rapaport goes on to state...
"I think the main reason this auction did not sell as much as we all would have liked was because we put in goods that were really great goods, very select goods--I daresay investment-quality diamonds," he said.
"What you're looking at now is an environment where you're introducing a stone that is a little bit more than people expect. They're not used to paying 10, 12 or 15 percent below [Rapaport]. There were bids from 9 percent below that didn't make it [to the reserve price]--that's how good the stones were. They're used to buying goods cheaply, so when they see these goods at these prices they have sticker shock."
Creating a Diamonds Future Market - a Tall Order...
Out of 210 lots, Rapaport sold only 27 lots. A paltry sum when one considers the "hype" surrounding this international event.
As quoted by Martin Rapaport..."I think, overall, it's quite disappointing to sell 27 lots out of 210," Rapaport said via a media teleconference at the close of the auction on Thursday. "In general, I would say we would have liked to see more parcels sold, greater pricing and people willing to pay more for the goods."
"A lot of bids came in within a relatively close margin to the reserve price. But we did this very, very strictly. It was very important for us to run this first auction with absolutely no controls and no limitations," he said. "I think we'll probably be disclosing the reserve prices because the idea was for people to be able to build momentum in the bidding like they do at Christies, Sotheby's and other large auction houses. But I think on the Internet it was pretty frustrating for people because they didn't know what the reserve price was."
Sticker Shock...Rapaport goes on to state...
"I think the main reason this auction did not sell as much as we all would have liked was because we put in goods that were really great goods, very select goods--I daresay investment-quality diamonds," he said.
"What you're looking at now is an environment where you're introducing a stone that is a little bit more than people expect. They're not used to paying 10, 12 or 15 percent below [Rapaport]. There were bids from 9 percent below that didn't make it [to the reserve price]--that's how good the stones were. They're used to buying goods cheaply, so when they see these goods at these prices they have sticker shock."
Creating a Diamonds Future Market - a Tall Order...
The auction was the first step in creating the type of price index that would be necessary for Rapaport to create a diamond futures market in which buyers and investors would be able to buy stones at fixed prices in the future, speculating on future price movements, as investors do in the gold market.
While it's admirable for Rapaport to attempt to create such a market, the simple fact may be that the "seller" in this case, is creating his "own" market for his own goods so, what's the point?
The creation of a diamond future markets must not determined by one individual but, by the creation of a market, which includes a variety of sellers from around the globe. The creation of such a market, would truly set specific benchmarks for diamond prices, however, if one organization is the sole provider of goods then one can liken such a scenario (or scheme) to that of putting the fox in charge of the chicken coop.
I was waiting to weigh in on this auction and quite frankly, I think Rapaport would have done much better offering his lots on eBay in order to gain a global audience. The range of goods should have been mixed and Rapaport could have set up his 210 lots (on eBay) with a "Buy it Now" option with a set reserve.
Then again, this auction is billed as a "members only" auction...
While it's admirable for Rapaport to attempt to create such a market, the simple fact may be that the "seller" in this case, is creating his "own" market for his own goods so, what's the point?
The creation of a diamond future markets must not determined by one individual but, by the creation of a market, which includes a variety of sellers from around the globe. The creation of such a market, would truly set specific benchmarks for diamond prices, however, if one organization is the sole provider of goods then one can liken such a scenario (or scheme) to that of putting the fox in charge of the chicken coop.
I was waiting to weigh in on this auction and quite frankly, I think Rapaport would have done much better offering his lots on eBay in order to gain a global audience. The range of goods should have been mixed and Rapaport could have set up his 210 lots (on eBay) with a "Buy it Now" option with a set reserve.
Then again, this auction is billed as a "members only" auction...
Posted by Posted by Jewelry News at Saturday, September 22, 2007 8:49 AM 
Categories: Diamond Industry, Diamond Futures Market, Rapaport
Categories: Diamond Industry, Diamond Futures Market, Rapaport
India may soon have rough diamond Futures
Commodity Online
MUMBAI: A new venture of the Multi Commodity Exchange (MCX) will soon add sparkle to the exchange.
Considering the potential, India’s leading commodity exchange has decided to launch rough diamond Futures soon.
The International Diamond & Gold Convention in Mumbai has drawn attention towards this and the issue is being discussed at the meet.
Futures trade in rough diamonds would help traders hedge against currency appreciation and the demand-supply position. It also helps them concentrate on designs, cuts and polishes.
This is important at this time following the strengthening of rupee in the recent past. Moreover, Indian jewellery makers have started using roughs more in jewellery meant for weddings.
According to officials, the MCX has been trying to find a unified standard for diamond Futures, but is yet to decide on one. The exchange would standardise a uniform benchmark in the near future.
On the other hand, the Forward Markets Commission (FMC), the commodity markets regulator, is planning index Futures in rough diamonds.
According to FMC, a small change in cuts and polishes change the standard of diamonds and, thereby, the price. Hence, a uniform standard is very difficult to arrive at. In such commodities, only index Futures can be thought of, said an FMC official.
India is one of the best polished diamond markets in the world. Over 83 per cent of the country’s gems and jewellery that are cut and polished account for exports. Surat and Jaipur are famous for their top notch polishing and designing centres.
The domestic diamond jewellery market is estimated at around Rs 8,000 crore per annum in retail value.
Because of increased disposable income and the industry’s aggressive promotion strategies, the demand in India is likely to remain upbeat in months ahead.
Diamond jewellery demand has increased significantly in recent years, from Rs 1,970 crore in 1995 to around Rs 8,000 crore in 2005. The demand in retail value has remained stable at around 71 per cent.
India at present sources roughs from Antwerp, despite having the capability to import, cut and polish all types of diamonds directly.
This process only increases input cost, resulting in jewellery items getting costlier in comparison with the nearest competitors, Israel and China. The rupee appreciation is also hurting finished jewellery exporters.
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