Analysis and Insights into the world of IPOs and investing in India

Thursday, March 30, 2017

What is IPO Grey Market and IPO Grey Market Premium?

IPO GREY MARKET AND ITS WORKING

IPO Grey Market is an unofficial market where IPO applications or *shares are bought and sold before they become officially available for trading on the stock exchange.

All transactions are done in cash on personal basis.

SEBI, Stock Exchange or Brokers are not involve or back these transaction.

It includes:
- Trading (selling or buying) IPO Applications at certain rate (premium) and
- Trading (selling or buying) allocated IPO shares before they list on stock exchanges.

Grey market trading is usually done among the small set of people who trust each other as there is no official platform or rules define for these trading

Terms used:

Grey market premium: Premium amount at which IPO shares are traded on stock market before they get listed on stock exchange. It can be positive or negative based on demand and supply of stock.

Kostak: Premium amount at which IPO applications are being traded in IPO Grey Market.
‘Kostak' is especially for people who do not want to take risk with IPO allotment or listing gains.

Who decides Grey Market Price?
Just like stock market or commodity market trading, IPO Grey Market

Premiums are decided on basis of demand and supply

If there are more buyers than sellers, the price goes up and vice versa.

Precaution:
As there are no regulatory bodies involved in Grey Market Trading and therefore there are no limitations on price momentum. Grey market premium may rise or fall suddenly

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