The Dutch Grey Market
22 Pages Posted: 22 Oct 2008 Last revised: 13 Mar 2013
Date Written: November 28, 2010
When-issued trading concerns transactions in securities that have not yet been issued. This paper investigates the Dutch “grey market” for when-issued shares prior to stock splits, using a unique hand-collected data set. Market makers are more likely to set up a when-issued market when the underlying firm is larger, the relative trading volume of the stock is higher, and the stock return is less volatile. The when-issued securities trade at a small premium over the regular shares during the weeks prior to the stock split, but this when-issued premium disappears in the last days of trading.
Keywords: Capital markets, Law of one price, Stock splits, When-issued trading
JEL Classification: G1, G2
Suggested Citation: Suggested Citation