write by Gainn Fintech
The Grey Market, also termed as a parallel market, operates as an unofficial trading platform for stocks and IPO applications.
In this market, investors engage in trading shares or applications before their official launch on the stock exchange. Transactions in the Indian grey market are typically conducted in cash and in person, without regulatory backing.
Grey markets in India operate based on demand and supply dynamics. Traders and retail investors often purchase shares before their listing. It offers an exit route for IPO participants and a chance for latecomers to acquire shares.
Grey market stocks involve unofficial trading of a company's shares before they are formally issued in an Initial Public Offering (IPO). Deals are based on mutual trust among a limited group of individuals, remaining legal yet unofficial.
Grey Market Premium represents the price difference at which IPO shares are traded unofficially. It forecasts the IPO's reaction on its listing day, showcasing demand and influencing IPO pricing.
Grey market trading encompasses two types: trading allocated IPO shares before their listing and buying/selling IPO applications at a specified rate or premium.
Trading IPO shares in the grey market involves steps such as sellers applying for shares, buyers seeking shares at a premium, dealers facilitating transactions, and subsequent allocation or transfer of shares.