Gray Market Trade

gray market trade

An open-market transaction in a when-issued security through brokers outside the selling syndicate.

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Gray Market Trade

A trade using unofficial and unregulated, but still legal, means. In securities, a gray market trade typically refers to trade in bonds or stocks not yet issued. These sales are contingent upon the issuance actually taking place, and are sometimes considered benchmarks for how successful the issuance will be. Another example of a gray market trade occurs in the pharmaceutical industry, in which buyers in different countries sometimes pay very different amounts. Buyers in the more expensive country may travel to the other country to buy their medicines, creating a gray market.