Both cash accounts and margin accounts can trade grey market stocks. Margin accounts may use margin financing to purchase grey market stocks. However, grey market stocks themselves cannot be pledged as collateral for margin financing.
Explanation: Difference Between Margin-Eligible Collateral Stocks and Margin-Financed Stocks
Margin-Eligible Collateral Stocks
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These are stocks that can be used as collateral to obtain additional margin buying power.
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For example, if you hold HKD 10,000 worth of Tencent shares, those shares may be used as collateral to obtain HKD 5,000 of margin buying power.
Margin-Financed Stocks
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These are stocks that can be purchased using margin buying power obtained from other eligible collateral stocks.
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For example, grey market stocks may be purchased using the HKD 5,000 of margin buying power generated by pledging Tencent shares as collateral.
In summary: Grey market stocks can be purchased using margin financing, but they cannot themselves be used as collateral to generate margin buying power.