Moscow Diamond Bourse Accepted into WFDB

Two years after its formation, the Moscow Diamond Bourse has been accepted into the World Federation of Diamond Bourses (WFDB). The Moscow bourse is the 26th member of the WFDB. The privately owned exchange is Russia’s second bourse; the other is owned by Alrosa.

Moscow Bourse president Lev Polyakov

Bourse president Lev Polyakov told IDEX Online before the vote that while the bourse currently has only 34 members, including two Israelis and a candidate from Monaco, they are planning on expanding membership and their facilities.

“We are interested in serving diamond traders, jewelry manufacturers, and gem traders,” Polyakov says. The bourse operates under a license from the Russian finance ministry to perform exchange operations in diamonds, gold, color stones, and future contracts related to these commodities.

On the need for a second exchange in Moscow, Polyakov points to the medium and small size businesses. “If you are a jeweler in Russia, you can’t buy diamonds. There is no safe, secure and legal place to buy diamonds.” In addition, says Polyakov, if you want to buy rough to polish goods on your own, you have to buy them from Alrosa. The minimum purchase is $2 million, Polyakov says.

Another issue Polyakov wants to address is banks not recognizing diamonds as collateral. The exchange is currently in discussions with two banks to change this situation. In this cash based market, the banks cooperation will allow for credit.

Other services are to include visa, airport pickup, insurance and security services, which in Russia includes body guards.

Ten to 20 percent of Russia’s diamond mining is done by independents, who sell their goods to Alrosa. With the new exchange there is another sales outlet, which improves their position and allows them to better realize prices.

Computer generated rendering of Moscow’s World Wide Diamond Center – future home of the new diamond bourse

Even this will not be enough room. A new building is under construction with space being offered to buyers in January 2007. The 67,000 square meter structure is expected to be ready by July 2008.

Once the bourse is up and running, Polyakov and board member Alex Popov say they expect a $2 - $2.5 billion turnover - if certain taxation issues are resolved. They are lobbying the Duma committee of precious stones to lower and eventually eliminate the 18 percent VAT and custom duties. At the very least, they hope it will be lowered to the 4 percent levied on all Russians.

To reach such a turnover, they are aiming for a membership of 2,000, half of which will be international companies. Considering that there are an estimated 25,000 Russian companies in the diamond, gold, and colored gem business, aiming for 8 percent of them is reasonable the two say.