DVP and RVP accounts

DVP (delivery versus payment) and RVP (receive versus payment) accounts are settlement arrangements used mainly by institutional investors, such as banks, mutual funds, and pension plans. Rather than holding cash and securities at the broker-dealer, the customer keeps assets with a third-party custodian, typically a bank, and each trade settles directly between the executing broker-dealer and that custodian.

The two labels describe the two sides of the same arrangement. In a DVP transaction, the customer is buying: the custodian pays for the securities at the moment they are delivered. In an RVP transaction, the customer is selling: the custodian releases the securities only when payment is received in exchange. Because payment and delivery happen simultaneously, neither side is exposed to the risk of paying for securities that never arrive or delivering securities that are never paid for.

These accounts are sometimes called cash-on-delivery (COD) accounts. To open one, the firm generally needs the customer's standing delivery instructions identifying the custodian bank, and the customer agrees to provide those instructions promptly for each trade so settlement is not delayed.

The Series 7 exam covers DVP and RVP accounts among the specialized account registrations. Know that they are institutional arrangements, that DVP applies to purchases and RVP to sales, and that trades settle through a custodian bank on a simultaneous payment-for-delivery basis.