Delivery Versus Payment (DvP) is a common settlement method that ensures shares are only delivered to an investor when payment has been secured. This form of settlement is effected by the ASX's CHESS system (Clearing House Electronic Sub-register System). It does this electronically by simultaneously transferring legal ownership of the shares with the transfer of funds. This is distinct from a 'manual' settlement where an investor will transfer funds to an issuer and receive shares direct from the registry.
DvP is designed to avoid settlement risk, where one party might fail to deliver on their side of the transaction.
Example: DvP Process
(note: this example is meant to be illustrative only and may change depending on the deal and broker).
- Investor receives an offer letter and DvP CARD from Fresh Equities.
- Investor submits CARD form to their broker for processing. Your broker will arrange payment with you - funds are usually drawn from your linked settlement account.
- Fresh Equities (via our clearer, Finclear) puts out a DvP message to your broker.
- Just prior the settlement date, your broker puts out a matching DvP message to Fresh Equities.
- On settlement day shares and funds are swapped in the CHESS system.
- 1-2 days after settlement shares will appear in your brokerage account.
Some Things to Note
- Not all brokerage accounts will support DvP. The design of this settlement method means that your broker will be taking some degree of risk. As a result, some brokers limit the use of DvP to premium/HNW/private accounts where they have an established relationship with the investor.
- Most full-service brokerage accounts will by default support DvP - please check with your broker prior to bidding or reach out to the Fresh Equities Settlements Team via email@example.com
- 'Online' brokers such as CommSec, NabTrade & CMC will require special setup to support DvP - please contact firstname.lastname@example.org for more information.