Abn-Amro Bank Rejects Diamond Futures Trading Mechanisms

Our article entitled “Diamond Futures Contracts Belong to a Traumatic Past”, which took issue with published comments made by the Global Head of Commodity Marketing Financial Markets, ABN-AMRO, evoked many responses. The suggestion to resurrect futures is made periodically (it’s a free world) and would not have warranted too many comments if it hadn’t come from the single largest industry financing institution operating in the diamond markets. With an industry credit exposure of some $2 billion, this bank has the know-how to know….and to know better.

Though there is a temptation to comment on some of the less rationale reactions to our article, there seems little purpose in turning a non-issue into an issue: the ABN-AMRO has officially confirmed that it will not launch any diamond related derivatives, and, specifically, no diamond futures. This should reassure clients and the industry that ABN-AMRO is not about to go on a folly – and that it does know better. The bank has made significant efforts to disassociate itself from the position made by its Global Head of Commodity Marketing Financial Markets.

Peter Gross, the Antwerp-based President of the International Diamond Division of the aforementioned bank says “the original article [by Brian Harmon de Clare] came as a complete surprise to me. It was obvious that the necessary [internal] liaising with our diamond business unit did not take place and our friends at the other side of the "Chinese Wall" [in London] in the bank dealing in financial products were not fully aware of the wider implications of their undertakings.”

 “This has been rectified in the meantime and I'm happy to confirm that it was agreed to discontinue any further activities towards the development of diamond based Futures Contracts or Over-the-Counter financial instruments.”

This “reversal” of the bank’s position comes only after thorough internal evaluation of the issue and no justification or compelling reason was found to reconsider the bank’s traditional opposition to “futures”. Peter Gross reiterates that “our bank's policy with regard to futures trading has not changed and we consider such instruments unsuitable for the diamond product.” The bank’s senior executive expresses his bank’s concern “about the possible effects of such diamond derivatives on long-term consumer confidence.” This says it all – and there is no reason to add anything to it.