Grey Market Trading
How Do I Trade on the Grey Market?
Introduction to Grey Market Trading
Grey market trading primarily refers to participation in the early trading of new Hong Kong stocks the day before the listing of an IPO for Hong Kong stocks.
Not all new stocks can be traded on the grey market. Only those listed on the main board are available for grey market trading. For stocks listed on the Growth Enterprise Market, due to different offering rules, participation risks are relatively high and there is no access to grey market trading for the time being.
As for the relationship between the grey market price and the listing price, although price fluctuations on the grey market reflect, to a certain extent, the degree to which new stocks are sought after, the grey market price does not fully reflect the market demand; thus, market prices cannot be regarded as an indicator of how a stock is trending.
The grey market trading market maker accessed by Long Bridge Securities Pte. Ltd. is a third-party Hong Kong securities broker.
Grey market trading hours
| On trading day prior to the official listing of the IPO | 4:15pm - 6:30pm |
| On a half trading day | 2:15pm - 4:30pm |
Trading arrangements during typhoons (signal no. 8 or above) and black rainstorm warnings:
| If the signal/warning is lifted after 12:00pm | Trading will be suspended throughout the day |
| If the signal/warning is lifted before 12:00pm | Grey market trading will start at 4:15pm as usual (2:15pm on half-day trading days) |
| For signals/warnings issued during a grey market trading session | Grey market trading will continue as usual until 6:30 p.m. (4:30 p.m. on half-day trading days) |
What types of orders are supported for grey market trading?
Grey market trading only supports limit orders.
Tick size of grey market orders
| Stock price (HKD) | Tick size (HKD) |
| 0.01-0.25 | 0.001 |
| >0.25-0.50 | 0.005 |
| >0.50-10.00 | 0.01 |
| >10.00-20.00 | 0.02 |
| >20.00-100.00 | 0.05 |
| >100.00-200.00 | 0.1 |
| >200.00-500.00 | 0.2 |
| >500.00-1,000.00 | 0.5 |
| >1,000.00-2,000.00 | 1 |
| >2,000.00-5,000.00 | 2 |
| >5,000.00-9,995.00 | 5 |
Are Longbridge's grey market prices/placements different from those seen at other securities brokers?
Grey market trading does not go through the exchange system; rather, such trades go through the internal system provided by certain securities brokers for price matching. For an independent internal transaction matching system, it is extremely common for prices to differ from other platforms.
Note: As certain securities brokers may access the same upstream, they will see the same quotations.
If an IPO listing is postponed or canceled, how will the trading order be processed?
Postponement of listing: executed trades will be considered valid. Uncompleted trade instructions will be canceled.
Cancellation of listing: All client trading instructions will be canceled or invalidated if the IPO is not successfully listed on the Hong Kong Stock Exchange
Change of listing terms/conditions: The changes to the terms and conditions of the IPO will not affect grey market trading, unless such changes result in the cancellation or postponement of the listing; in which case, please refer to the above arrangements.
Grey Market Trading and Settlement Mechanism
Trading mechanism
T+0 trading is also implemented on the grey market. Stocks bought on the grey market can be sold on the grey market on the same day.
Settlement mechanism
For orders executed during grey market trading, the trading date is the listing date of the IPO; thus, the settlement date is two market trading days from the date of execution (T+2).
For example: Grey market trading for IPO A is conducted on December 9, 2019 (Monday). The IPO is officially listed on the Hong Kong Stock Exchange on December 10, 2019 (Tuesday). The settlement date will be December 12, 2019 (Thursday).