Flow trading

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A stock trading desk

In finance, flow trading occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with funds from a client, rather than its own funds.[1]

Flow trading can be a significant source of profits for investment banks.[2][3] Engaging in flow trading can also boost a firm's own proprietary trading profits via access to information on client activities. Additionally, the firm can often facilitate client trades by serving as the counterparty, thus profiting from the bid-offer spread.[3][4]

In 2011 the Volcker Rule aimed to limit flow trading businesses from taking proprietary bets.[5]


  1. ^ Forex revolution: an insider's guide to the real world of foreign exchange by Peter Rosenstreich 2005 ISBN 0-13-148690-X page 85
  2. ^ The greed merchants: how the investment banks played the free-market game by Philip Augar 2005 ISBN 1-59184-087-2 page 111
  3. ^ a b Riskfree Rate Dynamics: information, Trading, and State Space Modeling by M. v.d. Wel 2005 ISBN 9789051707694 page 43
  4. ^ Uncontrolled risk by Mark T. Williams 2010 ISBN 0-07-163829-6 page 74
  5. ^ Bloomberg News Oct 10, 2011