DCP Oracle arbitrages commodity prices between China and the West


Greg Davidson, one of the pioneers of Sino-western commodities price arbitrage, elucidates his unique strategy of working within the regulatory barriers in China to glean uncorrelated returns

Trading global commodities at US physical commodity merchant Gerald Metals in the late 1990s, it became obvious to Greg Davidson that the rapidly growing China commodities market presented a natural arbitrage in terms of price differentials with the Western markets. This was primarily due to the closed nature of the China market which resulted in market inefficiencies, and the several regulatory barriers to arbitrageurs in the marketplace - after all, China's commodity markets were closed and the renminbi was a controlled currency. This made China the only market to