A grey market is a market in which traders bid on the company's shares unofficially. This grey market stock is managed by a small group of individuals, and all the transactions are based on confidence and trust rather than rules. In India, trading in the grey markets is legal but unofficial. The grey market is not regulated by SEBI or any other regulatory bodies, so investors must assume all risks associated with operating in the grey markets. In the grey market, the transactions are frequently organized through small slips of paper and unregistered sellers. Grey markets operated in India as a parallel stock market for a long time, and their legality is validated by their dealers and investors. Grey markets are mainly based on supply and demand, with traders and investors purchasing shares before they are listed. For any reason, if a person wishes to exit the IPO, the grey markets provide an option to them. Individuals can also purchase IPO shares after the deadline has passed. There are two forms of trading in a grey market for the IPOs: •Before listing on stock exchanges, allocated IPO shares can be traded (sold or purchased). •Trading applications at a specified rate (premium). How IPO shares are traded in the grey market? • Investors applying for IPO are concerned about the performance of shares, therefore they book profits by selling their shares in the grey market. They're the sellers in this exchange. • Investors who believe shares are valuable and listed at a premium try to acquire them from the grey markets. They're the buyer in this exchange. • Buyers contact dealers to purchase shares at a specified Grey Market Premium (GMP). • Dealers contact sellers who applied to sell shares, if the GMP is acceptable to the seller, the transaction is completed. Later, the dealer notifies the buyer. • The seller could or might not receive the share allocation. •If the shares are allotted, the seller transfers them to the buyer's Demat account. •If shares are not allocated to the seller, the transaction is terminated without payment. There are no official people to contact because the IPO grey markets are an over-the-counter market. To buy or sell IPO equities on the primary Markets, investors must find a local dealer who can find buyers or sellers on our behalf. Investors use grey markets primarily as a predictor of the near-term performance of listed IPO stocks. But, it's important to remember that the grey markets are an unofficial channel and that other regulated parties like SEBI, brokers, and investing platforms are not involved, therefore they come with their own set of risks. It makes no promises about how much the bids will cost. Thank you.
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