For decades, Martin Rapaport tried to create diamond futures, running afoul of the industry. How he is looking to come out on top through sheer tenacity.
"We're at the very beginning of the birth process,” says Martin Rapaport of his crusade to launch a futures contract for diamonds. His tone is strikingly upbeat for someone whose life’s work has been marred by so much failure. “Something has to happen.”
Rapaport, 56, is the founder and chairman of the Rapaport Group, a diamond brokerage and clearinghouse, and the industry’s leading provider of diamond pricing and market information. Over the course of three days last September, he held his first “Rapaport Certified Diamond Auction” online, the seminal step on the road to establishing an index based on monthly transaction prices and eventually, he hopes, a futures market tied to the index. To hold this auction, Rapaport’s company selected and approved the stones while the Gemological Institute of America rated them, similar to the way Moody’s or S&P rates a bond. Rapaport’s vision of commoditizing diamonds goes back three decades — but only recently has success seemed even remotely possible.
Should his plan ever come to fruition, the larger financial community — speculators — could trade the diamond market the same way it trades energy and precious metals. Diamonds are perhaps the last significant commodity not currently traded via some specific financial instrument.
“Diamonds are, in fact, already a commodity in all but name,” says Tom Zoellner, author of The Heartless Stone: A Journey Through the World of Diamonds, Deceit, and Desire. “Treating them as commodities will only help bring more transparency to this business, and perhaps chip away at the artificial scarcity that has kept the retail price so far out of whack with economic realities.”
Says Rapaport: “It doesn’t just happen that a guy wakes up in the morning and says, ‘I’m going to make a futures contract for diamonds.’ ”
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