9.2.4.1. Book-Entry Delivery and Payment
The delivery of bonds is simple for transactions that are automatically compared and matched. After being forwarded to a registered clearing agency (the NSCC) for clearing and settlement, the settled transactions are forwarded again to a registered securities depository. This would be the DTC, a custodian for the securities of its participating members. The DTC is an electronic accounting system. It holds securities in electronic (i.e., book-entry) form and transfers them between customer accounts as they are bought and sold. This eliminates the need for the physical movement of securities certificates.
The payment for most book-entry trades is also accomplished automatically and quickly by moving money from one member participant’s account to another’s.
Delivery vs. payment (DVP), or cash on demand, simply means that delivery and payment must occur simultaneously. Receive vs. payment (RVP) 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 may require payment in cash before it delivers them.