What is the 'Grey Market'

The grey market, also referred to as the parallel market, is a market where a product is bought and sold outside of the manufacturer's authorized trading channels. The grey market is where the unofficial trading of a company's shares, usually before they are issued in an initial public offering (IPO), happens. The distribution channels involved in the grey market are legal but are not provided by the original owner.


For example, if a store owner is an unauthorized dealer of a certain high-end electronics brand, the product is considered to be sold in the grey market. If the product is illegal, it would be selling on the "black market." The grey market is an over-the-counter market where dealers may execute orders for preferred customers as well as provide support for a new issue before it is actually issued. This activity allows underwriters and the issuer to determine demand and price the securities accordingly before the IPO.

Typical grey markets are small businesses built by individuals who are not authorized retailers of the goods being sold. These products are usually important goods that are expensive or not available in the country to which they are being sent to. This typically happens when the price of the good produced in one country is significantly higher compared to another country. For example, an entrepreneur would purchase a product where it could be bought cheaply, whether he buys it at retail or at wholesale. After purchasing the product, he would legally import it to another country at a price high enough to yield profit.

Grey Markets VS Black Markets

Grey markets should not be confused with black markets since they have a very distinct difference. Grey markets are imported goods sold purchased at a less expensive price and sold for a higher price. The importation of prohibited and illegal goods like firearms and drugs do not fall under the grey markets. These items are considered to be part of the black market. Goods under the black market are typically products that are smuggled into particular countries to avoid import matters.

Samples of Grey Market Products

Some common goods that fall under the grey market include computer games, automobiles, arcade games, pharmaceuticals, electronic gadgets, stock market securities and textbooks.

A real-world sample of a grey market is evident in the stock market. Investors can purchase securities that are not listed or quoted on a U.S. stock exchange or in any over-the-counter market through the grey market. The grey market does not have market makers placing prices on stocks. Since the securities are not quoted on a regulated system, the bid and offer prices of investors are not collected and transparency of stock prices is removed. This makes it difficult to execute transactions.

  1. Grey Swan

    A grey swan is an event that is possible and known, and is potentially ...
  2. Challenger Job-Cut Report

    A report, released monthly, that provides information on the ...
  3. Market

    A market is a medium allowing buyers and sellers of a specific ...
  4. Black Market

    A black market is economic activity that takes place outside ...
  5. Black Money

    Black money is money which is earned through any illegal activity ...
  6. Black Friday

    1. The day after Thanksgiving in the U.S., the kickoff of the ...
Related Articles
  1. Investing

    The Origins of the Chinese Stock Market Collapse

    Learn about some of the reasons for the volatility in the Chinese stock market, including expansion of margin lending and governmental support.
  2. Insights

    The Mechanics Of The Black Market

    Black markets will continue to exist as long as we have regulations and taxes. Discover how they work.
  3. Investing

    WSJ: Ex-Fox Films Boss in Talks to Head Paramount

    The next leader of Viacom's (NASDAQ: VIA) (NASDAQ: VIAB)  Paramount Pictures might be a former executive from one of its biggest rivals: The Wall Street Journal, citing "two people familiar ...
  4. Trading

    Currency Trading On The Black Market

    The black market for currencies is increasingly becoming prevalent in nations marked by certain adverse economic factors such as high inflation rates and unrealistically high exchange rates.
  5. Personal Finance

    5 TV Character Careers And What They Pay

    Some of your favorite TV characters live lavish lifestyles. But are they realistic, based on their jobs?
  6. Insights

    Black Friday Sales Figures: Fact and Fiction

    Retailers are eager to cash in on the all-important holiday shopping season. But what exactly should investors make of the ensuing sales figures?
  7. Financial Advisor

    4 Ways To Invest In Oil

    Many investors are looking for a way to invest in oil. Find out how you can buy into black gold.
  8. Personal Finance

    How Much Is Your Used Nintendo Worth?

    The market for used electronics is growing rapidly. Whether you opt to sell online or in-person, you can make good money off of your used devices.
  9. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  10. Investing

    October: The Month Of Market Crashes?

    In the finance world, October is a month to be feared, but is it justified?
  1. How is the stock market affected by Thanksgiving and Black Friday?

    Thanksgiving and Black Friday sales numbers are considered to be important indicators for stock market activity throughout ... Read Answer >>
Hot Definitions
  1. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  2. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  3. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  4. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
Trading Center