IB CookBook

It is fecilitating internal matching of orders from client in Broker's own internal dark pool. It is legal only when all the orders in the dark pool are agency orders. If principal order from broker's book is mixed with the agency order during matching, that doesn't become prop trading but creates conflict of interest andhence it is legal. Agency trading in dark pool (Fecilitation Trading) and Principal trading shouldn't be mixed. Also there should be separate desk for these. Traders having access to one desk shouldn't get access to other desk, else it will create conflict of interest.

Traditional Architecture of Algo Trading System Modern architecture of algo trading system

Algorithmic trading Algorithmic trading is a method of executing a large order (too large to fill all at once) using automated pre-programmed trading instructions accounting for variables such as time, price, and volume to send small slices of the order (child orders) out to the market over time. They were developed so that traders do not need to constantly watch a stock and repeatedly send those slices out manually. Popular "algos" include Percentage of Volume, Pegged, VWAP, TWAP, Implementation Shortfall, Target Close. In the twenty-first century, algorithmic trading has been gaining traction with both retails and institutional traders. Algorithmic trading is not an attempt to make a trading profit. It is simply a way to minimize the cost, market impact and risk in execution of an order. It is widely used by investment banks, pension funds, mutual funds, and hedge funds because these institutional traders need to execute large orders in markets that cannot support ...

In a structured product there is no liquid secondary market and the client is expected to hold it till the end of its life. Flow is a term used to denote that what’s being traded is a liquid security with an active secondary market.  So it is not a structured product. Flow traders “get flow” it gives them a huge advantage.  Either they agency trade it with no risk and make a certain commission or they risk trade it and though they take risk they also make the spread. Flow trading happens when a firm trades stocks, bonds, currencies, commodities, their backups, or other financial instruments, with resources from a client, rather than its own specific funds.Flow trading can be an important wellspring of advantages for wander banks. Participating in stream trading can in like manner bolster an organization's own particular prohibitive trading benefits by method for access to information on client works out, and the way that the firm can as often as possible energize...