Delivery versus payment is a settlement mechanism that links a securities transfer to a funds transfer so that delivery occurs if and only if the corresponding payment occurs. It exists to remove principal risk, the risk that one side hands over its leg and the other side does not. The definition dates to a 1992 BIS report and has not materially changed since.
DvP removes principal risk and nothing else. Counterparty credit risk, liquidity risk and market risk are separate categories that survive a perfect DvP design, and conflating them is how a settlement claim gets oversold.
The definition has not moved since 1992
The Bank for International Settlements set the term out in a 1992 report on securities settlement systems, describing DvP as a system providing a mechanism that ensures delivery occurs if and only if payment occurs.1 Two decades later the CPMI and IOSCO restated it in the Principles for Financial Market Infrastructures in almost the same words: a securities settlement mechanism that links a securities transfer and a funds transfer in such a way as to ensure that delivery occurs if and only if the corresponding payment occurs.2
The phrase carrying all the weight is if and only if. Not usually, not within a short window, not backed by an indemnity. A design where one leg can complete while the other fails, even briefly, is not DvP. It is a settlement arrangement with a gap in it, and someone is bearing that gap.
Three models, and which one a design is actually claiming
The 1992 report set out three structures that are still the standard taxonomy. Model 1 settles both securities and funds on a gross, trade by trade basis, simultaneously. Model 2 settles securities gross through the day and funds on a net basis at the end of the cycle. Model 3 nets both legs and settles them together at the end of a processing cycle.1
The distinction is about when each leg becomes final and how much exposure builds between. Model 1 minimises the exposure and consumes the most liquidity, because every trade needs full funding at the moment it settles. Models 2 and 3 economise on liquidity and, in exchange, leave participants exposed to each other across the cycle. Onchain systems that settle atomically per transaction are describing Model 1 whether or not they use the label.
What DvP removes, and what it leaves untouched
DvP eliminates principal risk: the loss of the full value of the asset or the cash when one side performs and the other does not. The PFMI treat counterparty credit risk, liquidity risk and market risk as separate categories that a financial market infrastructure has to manage independently of achieving DvP.2
That distinction matters in tokenized real world asset design, where atomic settlement is regularly presented as though it removed counterparty risk generally. It does not. A defaulting counterparty who never settles still leaves you holding a position you have to replace at whatever the market has moved to, and that replacement cost is market risk arriving through a settlement failure. DvP means you do not lose both legs. It says nothing about what the trade was worth by the time you discovered the failure.
Atomic settlement is Model 1, when the cash leg is on the same ledger
A token swap in a single transaction is genuine DvP, because both legs succeed or both revert. The condition is that both legs are actually on the ledger. Where the securities leg is a token transfer and the cash leg is a wire arriving hours later, the atomicity claim covers half the trade and the other half is an ordinary settlement obligation with ordinary settlement risk.
Federal Reserve staff make the adjacent point about tokenization more broadly: the custody, compliance and operational layers of the traditional market do not disappear when the record moves onchain.3 So the useful question about any DvP claim is a plain one. Where does the cash leg settle, on what ledger, and with what finality. If the answer involves a bank wire and a reconciliation, the design is Model 1 on one leg and something else on the other.
What to write down
Three lines in the design document. Which model the design implements, named explicitly rather than implied by the word atomic. Where finality occurs on each leg, and under whose law, since finality is a legal state rather than a confirmation count. And what happens when one leg fails: reversal, retry, a queue, or a claim against a counterparty.
Then state the risks the design does not address, because writing them down is what stops a settlement guarantee from being read as a counterparty guarantee. Whether a particular arrangement achieves legal finality in a particular jurisdiction is a question for counsel, not a property of the code.
Common questions
What does delivery versus payment mean?
It means a securities transfer and a funds transfer are linked so that delivery happens if and only if the corresponding payment happens.2 The purpose is to remove principal risk, the danger that one party hands over its side of the trade and receives nothing back. The definition comes from a 1992 BIS report and has been carried forward largely unchanged into current international standards.1
Is atomic settlement on a blockchain the same as DvP?
Only when both legs sit on the same ledger. A single transaction that swaps a security token for a payment token is a gross, simultaneous settlement, which matches the Model 1 structure BIS defined.1 If the cash leg settles by bank wire outside the transaction, the atomicity covers the securities leg alone and the payment leg carries ordinary settlement risk.
Does DvP eliminate counterparty risk?
No. It eliminates principal risk, the loss of the full value of one leg. The international standards treat counterparty credit risk, liquidity risk and market risk as separate categories that have to be managed on their own.2 A counterparty who fails to settle still leaves you replacing the position at whatever price the market has moved to, and that cost is real whether or not the settlement mechanism performed.
See RWA Tokenomics Design for how this applies in practice.
Sources
- Delivery versus payment in securities settlement systems (CPSS Publication No. 6)
Bank for International Settlements, Committee on Payment and Settlement Systems, 1992
The founding definition of DvP and the three structural models: gross securities with gross simultaneous funds, gross securities with net funds, and both legs netted at end of cycle. - Principles for Financial Market Infrastructures
CPSS-IOSCO, 2012
The standing international definition of DvP, and the treatment of counterparty credit, liquidity and market risk as categories separate from achieving delivery versus payment. - Tokenization: Overview and Financial Stability Implications (FEDS Working Paper 2023-060)
Board of Governors of the Federal Reserve System, 2023
Central bank staff research noting that custody, compliance and operational costs persist in tokenized structures rather than being removed by onchain recordation.
Last reviewed 2026-08
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