If you are thinking of investing in diamonds, this article briefly looks at workings of the diamond industry, the role played by a Bourse and how the diamond market is regulated by the World Diamond Council (WDC).
What is the function of a diamond Bourse?
A diamond Bourse is a diamond exchange where rough and polished diamonds are traded between members. Along with providing trading platforms, it also plays an important role in the resolution of trade disputes as well as being a place where members can network.
Globally, there are 29 diamond Bourses each of which is a member of the World Federation of Diamond Bourses. Unlike stock exchanges, diamond Bourses operate on openness and trust in a calm and friendly atmosphere. Diamonds can be assessed using state of the art equipment with quality, value, and risks discussed openly.
Most rough diamonds are traded in Antwerp where there are four diamond Bourses. Between them, they handle around 85% of the world’s supply of rough diamonds. Founded in 1904, it now serves a community of over 2,000 diamond traders and manufacturers.
When the Nazis occupied Belgium in 1940, the diamond trade moved to London and the London Diamond Bourse, based in Hatton Garden, was founded.
The Antwerp Bourses run an internal judicial system separate from the Belgian courts. Known as the reconciliation commission, it provides an efficient way of resolving conflicts between Bourse members, and its ruling is considered final.
How do diamonds get to market?
From mining to retailing, the diamond market value chain includes:
- Diamond exploration and rough diamond production. The top five players control 70% of the supply
- Sales of rough diamonds from producers and rough diamond traders; there are around 100 players worldwide
- Cutting and polishing rough diamonds; wholesale and polished diamond trading; there are around 5,000 players worldwide
- Jewellery design and manufacturing; there are over 10,000 players globally
- Retail sales of diamond jewellery and watched. Large retailers control around 35% of the diamond market.
What is the World Diamond Council?
Established in 2000, the World Diamond Council (WDC) is a global network of businesses and organisations engaged with every stakeholder of the diamond market from producers through to retailers.
Its primary role is to represent the diamond industry in developing and regulating systems designed to control the trade in embargoed diamonds (blood diamonds) covered by the United Nations and the Kimberly Process.
In other words, it serves to maintain the integrity of the diamond supply chain, promote alignment and responsibility within the industry, and to provide education and training.
What is the Kimberly Process?
The Kimberly Process is a trading regimen developed to stem the market in conflict diamonds. Its primary activity is the Kimberly Process Certification Scheme in which safeguards are implemented on rough diamond shipments so they can be certified as “conflict free”.
Investing in diamonds
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