Receive Versus Payment (RVP)

Receive versus payment is a settlement procedure in which an institutional sell order is accompanied by the requirement that cash is only accepted in exchange for delivery upon settlement of the financial transaction. In other words, the delivery of the securities and delivery of the payment must happen simultaneously. This can be contrasted with delivery versus free (DVF) where no exchange of cash needs to occur at the same time the securities are delivered. Delivery of payment can occur at a time separate from delivery of securities with delivery versus free settlement. Receive versus payment provisions arose when institutions were prohibited from paying money for securities until they held the securities and they were in negotiable form.

Also called receive against payment (RAP).

A significant source of credit risk in securities settlement is the principal risk associated with the settlement date. The idea behind the receive versus payment/delivery versus payment system is that part of that risk can be removed if the settlement procedure ensures that delivery occurs only if payment occurs (in other words, that securities are not delivered prior to the exchange of payment for the securities). The system helps ensure that payments accompany deliveries, thereby reducing principal risk, reducing the chance that deliveries or payments would be withheld during periods of stress in the financial markets and reducing liquidity risk.