What Is the Gray Market for Stocks? By Russell Huebsch, eHow Contributor What Is the Gray Market for Stocks? Gray-market stocks are those traded before the initial public offering.
The gray--or "grey"--market for stocks refers to an unregulated marketplace for stocks where brokers buy and sell shares of a company before it is listed on a regular stock exchange. Gray markets are legal in the United States and most of the world, although they are less frequent in this country. Other People Are Reading
Companies preparing an initial public offering often use the prices from the gray market to set the value for their IPO, according to Investopedia.com. They can also fix any investor concerns before the stocks are publicly traded. Features
In order to buy a stock on the gray market, the buyer must know somebody associated with a business. Unlike a normal trading place, such as the New York Stock Exchange, there is no central clearinghouse for the gray market. It is not illegal or "inside trading"--buyers are purchasing the right to buy stock yet to be issued.
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