Gray markets, sometimes also referred to as "black markets", are unofficial, over-the-counter financial markets in securities. These markets trade in securities that have been suspended from official trading, or have not yet begun official trading on an exchange. The characteristic of these markets is that, unlike normal OTC trading, these securities never trade on an exchange, yet trading in them still takes place.

This type of trading is not illegal, though it is viewed as a riskier form of investing. The security in question can be either publicly traded or privately issued and the volatility of the security can be high due to the uncertainty of the conditions of the financial markets. The main factor affecting the return on investment of these securities is the characteristics of the involved parties.

In some cases, financial professionals may take advantage of the sketchy nature of these markets to make profits by engaging in practices that could be considered unethical or illegal. These include insider trading, pump-and-dump schemes, and market manipulation.

Gray markets are not limited to just financial securities. They can also include products, commonly imports, that are distributed through alternative channels. This can include products that are imported without the authorization of the product's manufacturer, or products that are purchased outside an authorized distribution network. This type of gray market trading can involve a large variety of products, such as electronics, luxury goods, and even copyrighted material.

In a gray market, buyers and sellers exchange goods at prices that are outside of typical exchange markets. Gray markets are susceptible to numerous complications. Because the goods are bought and sold outside the oversight of regulatory bodies, there is a high degree of risk associated with it. There is also the risk that the products being traded are counterfeit, stolen, or of potentially lower quality than the same products available in an approved channel.

In conclusion, gray markets refer to unofficial exchanges of securities, products, and other goods. While not illegal, participating in a gray market carries the increased risk due to the lack of oversight and regulation. Furthermore, buyers and sellers of these products can be exposed to counterfeits, stolen property, and lower quality products. As a result, buyers and sellers should exercise caution when engaging in any kind of gray market transaction.