Delivery versus payment: Meaning (information, definition, explanation, facts)

Delivery versus payment is used to classify a business transaction. DVP trading is defined as transactions in which payment and transfer of the subject security occur simultaneously where:

• little or no credit risk exists in the settlement process (e.g. central depository system such as DTC or Euroclear), and
• the settlement period is the normal spot settlement period for the product and market, and
• the transaction does not create credit risk after settlement.

Any transaction entered into with a negotiated settlement period beyond the normal cash settlement date for the particular product and market and any transaction with a settlement date more than 45 days from trade date is not considered a DVP transaction.

There is also non-DVP trading.