Delivery vs. Payment
Most securities today are issued in book-entry form and do not involve the ownership of physical certificates. Book-entry securities exist as a computer record on the books of the issuer and the investor’s broker-dealer. The sole evidence of ownership is the trade confirmation issued by the broker-dealer and the monthly statements that the brokerage firm provides.
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.
FINRA Rule 11310
Delivery vs. payment (DVP) is an agreement that the buyer will pay the seller immediately upon the security’s delivery to the buyer. Receipt vs. payment (RVP) refers to the other side of the transaction, where the seller agrees to deliver the security to the buyer immediately upon receiving payment. Both DVP and RVP are meant to ensure that payment and delivery occur simultaneously. Each DVP order must note that it is a payment on delivery (POD) or collect on delivery (COD) transaction: COD refers to a purchase and POD refers to a sale.