Non-DVP

trading Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct excha ...

is defined as

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

trading where a client's custodian will have to release payment or deliver securities on behalf of the client before there is certainty that it will receive the counter-value in cash or securities, thus incurring

settlement risk Settlement risk is the risk that a counterparty (or intermediary agent) fails to deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security ...

. DVP stands for

delivery versus payment Delivery versus payment or DvP is a common form of settlement for securities. The process involves the simultaneous delivery of all documents necessary to give effect to a transfer of securities in exchange for the receipt of the stipulated payment ...

. A party to a transaction pays for something when it is delivered. When there is a delivery from A to B, delivery is made by A, receipt is had by B. B, the party that receives, is obliged to make a payment. The issue revolves around: # the timing of the transaction # the value of the transaction, and # the trustworthiness of A and B. The ideal situation is timing is matched for delivery/receipt and payment without any lag or deferral. If A and B had previous dealings and are completely trustworthy, then they may not mind delay of one or two working days. Whereas if trust has not been established, delay of one hour means the transaction is non-DVP. In terms of value, the larger the value, the greater the urgency for everything to be completely wrapped up. Note: Whenever there is a delivery, there is a receipt; also known as non-RVP (non-Receipt versus payment).

References

Securities (finance) Settlement (finance) {{econ-stub

See also

References