Compare: Flow Trading, Agency Trading, Risk Trading, Prop Trading, Principal Trading

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 client trades by serving as the counterparty, along these lines profiting from the offer spread
• flow trading involves the client’s fund. In Flow trading, there is some of the amount of agency trading (acts just as an agent and just execute the orders of the clients) and some amount of proprietary trading involved.
• Flow trading is a generic name given by investment banks to all the activities done to manage the funds of clients. It is a term that has market making, hedging, risk review and market pricing under one single umbrella.
• Normally, a flow trader does any of the followings
• He divests his positions to his clients with making profits
• He buys for his client and also for his prop books
• He functions as a market maker
• As a whole, a flow trader always tries to maximize the profit on a daily basis. Flow trading involves a lot of prop trading and as Volcker rule has proposed to ban the concept of prop trading, there is a doubt in the market as to whether flow trading will also be subjected to ban.
• A flow trader could be either an agency trader or a risk trader.
• Trading
• Flow Trading
• Agency Trading
• Risk Trading
• Prop Trading

Agency refers to trading as a middle man to pass (cross) a security from one client to another (or to the market). When you buy a bond from someone who is acting as an Agent, it means they do not own the bond that you are buying. Instead, they are buying the bond from a dealer and the reselling it to you. 

• Agency traders are paid commission to get the job done and they assume no risk.
• Agency trading a trade on a securities trade that is begun by an office for its client. This may come as a quick demand from the client or the workplace may execute trades at their own specific mindfulness if the client agrees to this. The client may be charged an apparent cost for each office trade that is done.

In Risk Trading there is no other client on the other side. Instead the risk trader buys (or sells) from the client, keeps the position, and therefore assumes risk on it. A market maker is a type of risk trader. Depending on the product they might (stocks) or might not (convertible bonds) get a commission.

A prop trader has no access to flow, makes no commission and probably has to pay the spread. The difference is substantial and many a flow trader working in a bank has gone out on their own and suddenly found they can’t beat the market anymore.

A principal trade occurs when a brokerage house buys securities on the secondary market with the express strategy to hold long enough for a price appreciation. At that point the broker sells retails to the end use and gains appreciation plus commission. Brokers are required to notify when they provide a principal trade, though will typically obfuscate the fact through the fine print. The broker always seeks to sell their inventory to prospective buyers rather than buying new into the market. Common in bond sales.