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Describes the sale of securities that have not officially been issued to firms other than the underwriting syndicate. This type of market serves as a good indicator of demand for a new issue in the public market.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
Trade using unofficial and unregulated, but still legal, means. In securities, a gray market 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 is the pharmaceuticals 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.
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