CEDEX Holdings Limited and U2 Diamonds have entered into a joint venture that will bring the company closer to achieving its vision of transforming diamonds into a new financial asset class. A statement announcing this said that the JV would also help in creating the conditions for setting up the world’s first Diamond Exchange Traded Fund (ETF).

The joint venture will:

• Market polished diamond indices to ETF and Future issuers.
• Enhance the Advanced Diamond Index accuracy based on the CEDEX proprietary algorithm DEX price feed.
• Jointly promote and market advanced diamond Indices to market participants.

CEDEX is an online exchange for trading in digitised diamonds in the form of Digital Diamond Certificates (DDC). It uses its DEX proprietary algorithm and blockchain technology, which it says, overcomes the lack of transparency, liquidity and standardisation that has hampered online trading in diamonds.

U2, through its subsidiary U2 Diamond Prices, is regulated in the UK by the FCA as an EU Benchmark Administrator. The firm uses prices from arms’ length transactions in the wholesale diamond market to publish investable diamond indices that can be used to link to financial products.

The JV will bring together DEX technology with the FCA regulated indices of U2 to create the required clarity and certainty needed to boost online trading by providing price point transparency, the statement said.

It will also allow institutions to generate financial contracts and instruments with appropriately-priced underlying assets linked to them – making a diamond ETF achievable.

There will thus be new opportunities to “develop diamond linked products as a non-correlated alternative asset class for investment and preservation of wealth similar to the way precious metals are used as a safe haven by investors”, the statement adds. Currently, only 1% of the current value of the diamond market is being used for financial investment, it notes.

CEDEX said it has connected to diamond suppliers and already listed over $100 million worth of diamonds on its platform.

Saar Levi CEDEX CEO said, “This infrastructure with the increased security and efficiency the blockchain offers, will not only allow diamond holders to liquidate their assets at a fair price thanks to CEDEX’s price feed, but financial institutions will be able to trade diamonds at low carry cost and with a diversified risk profile that matches their trading strategies.”

He added that the JV partners were “currently in talks with tier 1 & 2 ETF and Futures Issuers, Index Providers, Market Makers, Authorized Participants (APs), banks, exchanges and other financial institutions”.