I'm Mark Molloy -- a software developer and inventor who has moved into the wholesale diamond market space as a co-founder of Liquid Diamonds Inc. When I first got introduced to the industry, I was surprised that most people had no idea what the price of a diamond was. Instead, they knew the percentage off the Rapaport Price List ("Rap") they would pay or accept. So "37 back" meant 37% less than the price that would be calculated for a stone using Rap. And:
Being a student of how markets work, I found this very curious. My conclusions:
In a sense, the Rapaport Price List has developed problems stemming from its own acceptance and success:
What, then, does the existence or particulars of a "wholesale price list" have to do with diamonds being a liquid market? Very little.
- The seller of each diamond sets the price at which they're currently willing to sell (their ask). But this is done in transparent competition against other diamonds, and both the asking prices and the diamonds are compared by buyers in evaluating which ask is actually most valuable to them.
- Buyers specify the price they are currently willing to pay for each alternative diamond they are willing to buy (their bids). This is also done in transparent price competition against other buyers who are willing to purchase each diamond as alternatives for their current needs.
- A "market buy" executes the transaction that gives the buyer the best value for the price paid in the current market, according to their own definition.
- A "market sell" executes the transaction that gives the seller the most money for value yielded in the current market, according to the seller's own definition.
- Overlapping bids and asks become transactions; non-overlaps define and stabilize market prices. The more such non-overlaps (unsatisfied bids and asks) there are, the more liquid the marketplace is.
Where would a "wholesale price list" such as Rap fit in here? It would be replaced by a dynamic listing of moving average prices for each shape/carats/color/clarity category, which could be useful for planning, etc. Because these values would be constantly changing, buyers and sellers would have to learn to think, negotiate, and remember prices in per-carat terms. By having a historical price list (e.g. March 2020) and conversion tool readily available, this should be easy.
But in a liquid market, the marketplace would set prices, as described above. Stay tuned.