2.8.5. Book-Entry Delivery: DVP vs. RVP
Most securities today are issued and traded in book-entry form, meaning that ownership of the security does not involve ownership of a physical certificate. Instead, book-entry securities exist as a computer record on the books of the issuer and the investor’s broker-dealer. Trade confirmations and account statements are the investor’s evidence of ownership.
Member firms must use the facilities of a securities depository for the book-entry settlement of securities transactions. Book-entry transactions may be settled by delivery vs. payment or receipt vs. payment.
Delivery vs. payment (DVP), or cash on demand, simply means that delivery and payment must occur simultaneously. Receive vs. payment (RVP), or cash on delivery, is its counterpart. DVP means that a buyer does not have to pay for its purchased securities until it receives them. RVP means that a seller will not receive payment in cash until it delivers the securities. A DVP/RVP account must be approved by a registered clearing agency that uses an automated confir