A gray market or ‘grey market’ can be described as an informal market for financial securities.
Gray market exchanging, for the most part happens, when a stock that has been suspended from stock market exchanges, and is now being traded off the market, or when new stocks are purchased and sold before formal trading on stock market exchanges starts.
The gray market empowers the issuer as well as the underwriters to measure the demand for a new issue.
It is important to know that the gray market is an informal way of trading but it cannot be classified as illegal.
The expression “gray market” additionally alludes to the importing and selling of goods by unauthorized sellers; right now, these activities are just unofficial and not illegal.
In gray market exchanging, while the trade is binding, it can't be settled before official trading has started.
This may make a deceitful trader to default on the trade.
Because of this risk, some institutional investors, such as mutual funds, may stay away from gray market exchanging.
The gray market for other products flourishes when there is a huge value inconsistency for a well known item in various countries.
In numerous countries, there is a considerable gray market for popular consumer gadgets and electronics because these can be easily bought on the web and shipped to any area.