Rough Diamond Tenders Go Online

This past Tuesday afternoon history was made. The first true online rough diamond tender was concluded, and goods worth about $100,000 were sold to the highest bidders. JDMine, the firm that ran the pilot auction on behalf of the diamond owners, plans to take that modest start and run with it.

At the Shoham-Ayalon offices in the Israel diamond exchange's Diamond Tower, interested buyers were checking the goods last week, examining box after box of rough goods. Not only were they trying to decide how much to bid on the goods, they were also asking questions about how the bid works.

Currently, the answer is fairly simple: after examining the goods, potential bidders go online and register for the auction. They are approved individually to ensure they are indeed rough diamond traders.

Once approved, they enter JDMine.com, look down a list, and select the specific diamonds they want to bid on. Most rough diamond tenders are ‘sealed envelope’ auctions, where each bidder places a bid in an envelope that is opened at the tender's conclusion. The highest bidder takes the goods.

According to Erez Rivlin, JDMine CEO and a veteran rough diamond dealer and manufacturer, the ‘closed envelope’ system can result in great differences between the highest bidder and the runner up – sometimes as much as 50 or even 70 percent difference. Rivlin's system is similar to the more common online auction in which the amounts being offered are seen publicly. Bidders can follow the offers in real time as the auction page refreshes every 15 seconds.

Where the system differs from most public auctions is with the ‘progressive bid’. Instead of ending the bidding on all the goods at one time (as in sealed envelop bids), only two bids end at any one time. This method allows bidders to maximize their budget – if they did not get the stone they wanted, they can still bid on other stones.

The sellers, who would otherwise sell their rough though other methods, trade the goods at a premium, a strong outcome.

All in all, the auction sold about 20 diamonds. Several dozen companies submitted, of which 10 were successful bidders. JDMine charges the sellers a percentage for the service, which is based on the size of their lot. Stones were sold at between their minimum asking price, to 15 percent above this figure.

In the future, Rivlin plans to hold bids in a variety of ways, including auctions limited to a small number of invited bidders, sealed envelop bids for unusual items, add a reserved price on goods - either exposed or not, and of course bids where the goods can be viewed in other global centers besides Israel.