The grey market is an unofficial market and operates outside the ambit of SEBI regulation. Any trade or bids done in the grey market does not have the authorization or approval off the regulator or any of the stock exchanges. Remember, prices fluctuate wildly in the grey market as there are no circuit filters. Also, while the grey market is not banned, it is entirely at the risk of the traders that this market functions.

Obviously, that also means trades are not guaranteed in case of grey market. Therefore, you do run a counterparty risk when you buy and sell shares in the grey market. Since this is not a market regulated by SEBI, the regulator normally dissuades retail investors from participating in these markets. Unlike exchange traded transactions, where the clearing corporation is the counterparty, the grey market is open to default by the other party. To that extent, it is more like a forward market. It is a market that entirely runs on trust and the reputation of the key players in the market.