The Istanbul Gold Exchange (IAB) launched diamond trading Monday.

Existing IAB members will be allowed to trade in both rough and polished diamonds, and dealers from the city's Grand Bazaar jewelry center will also be invited to participate.

IAB Vice-President Oguzhan Aloglu told the Financial Times that over the past decade Turkey has seen a rising demand for diamond products, especially among younger customers. Aloglu noted that the Diamond Trading Company had valued Turkey's current diamond market at $1 billion.

According to Aloglu, diamond trade volume would be relatively low at first, due mostly to the country's 20% import tax on diamonds. However, he said, the state-owned IAB had joined the World Federation of Diamond Bourses and its members would benefit from access to other international diamond exchanges.

Turkey is the fourth-largest market for gold jewelry in the world, but gold trading has dropped as prices for the metal spiral. In 2008, the IAB traded 337 tons of gold, compared to 115 tons in 2010. Gold prices are also affecting consumer jewelry purchases, with customers opting for 14 karat rather than 24 karat gold, Aloglu said.