Let us say you applied in an IPO for 800 shares and got allotted 400 shares. In the grey market, the stock is quoting at a premium of 45%. Hypothetically, you can sell these shares in the grey market and lock in the price. If the stock lists at 20% premium then you tend to benefit but if the stock lists at a 100% premium then you tend to lose out. To that extent these are exactly like forward transactions only. We would like to add that this is an unregulated market and hence it is therefore vulnerable to counter party risk.

As started earlier, the grey market is a closed market which operates outside the purview of SEBI regulations. Hence all transactions are in the form of forward transactions and are open to counter party risk. At best you can look at grey markets as indicative of the listing price. Again, do not take them too seriously as such grey market prices are also subject to manipulation. More so when these prices and trades are cornered by a small clique of brokers and traders, manipulation becomes a lot simpler.