CHY 102 Study Guide - Final Guide: North American Free Trade Agreement, Developed Country
Document Summary
Gray market trading occurs when a stock that has been suspended trades off-market, or when new securities are bought and sold before official trading begins. The gray market enables the issuer and underwriters to gauge demand for a new offering because it is a when issued market, i. e. it trades securities that will be offered in the very near future. The grey market is an unofficial one, but is not illegal. The term gray market also refers to the import and sale of goods by unauthorized dealers; in this instance as well, such activity is unofficial but not illegal. In gray market trading, while the trade is binding, it cannot be settled until official trading begins. This may cause an unscrupulous party to renege on the trade. Due to this risk, some institutional investors like pension funds and mutual funds may refrain from gray market trading.
