What is grey market trading

1. Transactions Related

1.1 What is a grey market?

The grey market is an over-the-counter market. In Hong Kong, it is generally used for pre-listing trading of new stocks, which is carried out on the trading day before the listing of new shares and after the market close. Hong Kong stock trading is generally matched through the Hong Kong Stock Exchange system during trading hours. However, grey market trading does not go through the exchange system, but through the internal system provided by some brokerage firms for quotation matching.

1.2 How to operate grey market trading on Futu?

Update the client terminal to the latest version and perform the following operations to operate grey market trading.
The first step is to find the grey market stocks you want to trade:
Find the grey market stocks that will be listed the next day and want to trade in "Pending Listing";
The second step is to place an order:
Enter the quantity and price to confirm the transaction.

1.3 What are the trading hours for grey markets?

Grey market trading hours are 16:15 ~ 18:30 on the trading day before the official listing of the new stock;

If the grey market is a half-day market, the trading hours are 14:15 ~ 16:30.

1.4 If the listing of new shares is delayed or cancelled, how will the transaction order be processed?

If the listing of new stocks is delayed or cancelled before the opening of the grey market, the grey market will be delayed to the trading day before the latest listing day or cancelled;
If a new stock announces the delay or cancellation of listing after the start or end of the grey market, then:
Postponement of listing: orders that have been filled are deemed valid and will be settled normally at L+2; orders that have not been filled will be cancelled;
Cancellation of listing: All transactions of the new stock will be cancelled and deemed invalid. The funds or stocks deducted from the grey market trading of the new shares will generally be returned to the client's account one trading day after the listing is cancelled.
Note: L: listing date, L+2 is the second trading day after the listing date

2. Risk Control Related

2.1 What are the buying power limits for grey market trading?

Because grey market transactions are over-the-counter transactions and there is a risk that all trading orders may be cancelled, the net cash from selling grey market stocks cannot be used to buy other stocks, and the net cash will be frozen until the company is successfully listed. Or the listing is cancelled. for example:

Suppose you hold a grey market stock A, the cash in your account is 0, and you sell at 2000HKD at the time of grey market trading. The 2000HKD will be frozen. During the 2000HKD freeze period, there will be:

(1)If you want to buy stock B during normal trading hours, the buying power of buying B stock is 0 HKD;

(2)If you want to buy the grey market stock C during the grey market trading hours, the buying power of buying C stock is 0HKD;

(3)If you want to buy back the grey market stock A during the grey market trading hours, the buying power of buying back A stock is 2000HKD.

2.2 How is the frozen amount of grey market trading calculated?

The frozen amount generated during the grey market trading process = the cumulative net selling volume of grey market stocks, for example:

(1)If you buy 2000HKD grey market stock A. The frozen amount at this time = 0HKD

(2) Continuing the example above, if you sell another 3000HKD grey market stock A. The frozen amount at this time = 1000HKD

(3) Following the above example, if you buy 4000HKD stock B in the grey market. The frozen amount at this time = 1000HKD

(4)Continuing the example above, if you sell another 5000HKD grey market stock B. The frozen amount at this time = 2000HKD

That is, the final frozen amount = the net selling amount of grey market stock A + the net selling amount of grey market stock B.

2.3 Can grey market stocks guarantee to finance?

Both cash account and financing account can trade grey market stocks, financing accounts can use financing to buy grey market stocks, grey market stocks cannot guarantee to finance. Description:

The difference between guaranteed financing stocks and available financing stocks:

Guaranteed financing stock: refers to the stock that can be used as a guarantee to obtain financing buying power. For example, if Tencent holds 10000 HKD, Tencent can obtain 5000 HKD financing buying power as a guarantee.

Useable financing stock: refers to the buying power that the stock can obtain by using other stock guarantees. For example, grey market stocks can use the 5000HKD financing buying power obtained by the Tencent guarantee.



3. Settlement Related

3.1 Trading and Settlement Rules

● Trading Rules

T+0 trading is also implemented in the grey market, and the winning new shares and the stocks purchased in the grey market can be sold in the grey market on the same day. The electronic daily statement containing the transaction details of the grey market transaction will be sent to the customer's mailbox on the next trading day (usually the day when the new stock is listed) after the grey market trading day.

● Settlement Rules

Grey market transactions will be settled on the second trading day after the listing day (Listing Day), that is, L+2 settlement; if there is financing due to grey market transactions, this part of the funds will also be at L+2 The interest is calculated from the date.

For example, the grey market of a new stock A was conducted on June 25, 2018 (Monday), and it was officially listed on the Stock Exchange on June 26, 2018 (Tuesday), and the settlement date and financing start date are 2018 June 28 (Thursday).


4. Quatation Related

4.1 The changes on the official listing date have nothing to do with grey market quotes

The rise and fall of the grey market quotation are calculated based on the IPO price of the new stock; after the grey market closes, the grey market quotation of Futubull will remain until 24:00 Beijing time, and then reset to the IPO price. The decline is still calculated based on the IPO price of new shares.


5. Charge Related

The details of the IPO grey market charges are as follows:

Unless otherwise specified, the fee will be calculated with two decimal places and rounding rules.

5.1  FUTU Charges

● Commission

TypesCostCharging party
commission0.03%*Total transaction amount, minimum HKD 3 per transactionFutu Securities

● Platform usage fee

TypesCost
Platform usage feeHKD 15 per order


5.2 Collection Items

TypesCostCharging party
Central settlement fee0.01%*Transaction amount, minimum 3 HKD, maximum 300 HKDHong Kong Clearing House and upstream channels
Transaction stamp duty0.13%*Transaction amount, less than 1 HKD is counted as 1 HKDHong Kong government
Transaction fee0.005%*Transaction amount, minimum HKD 0.01Hong Kong Stock Exchange
Transaction levy0.0027%*Transaction amount, minimum HKD 0.01Hong Kong Securities Regulatory Commission

Grey market trading fees have nothing to do with the status of Hong Kong stock trading commission fees, all fees are charged normally.