DVP exemption - CASS Provision: Difference between revisions

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DVP exemption - CASS Provision (view source)

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{{anat|cass|}}The [[DVP exemption]] allows a firm a waiver from the full rigours of the CASS [[safe custody]] and [[client money]] rules for money or assets delivered to the firm when settling a [[delivery versus payment]] transaction.  
{{anat|cass|}}The [[DVP exemption]] allows a firm a waiver from the full rigours of the CASS [[safe custody]] and [[client money]] rules for money or assets delivered to the firm when settling a [[delivery versus payment]] transaction.  


the first thing to note is this covers money and financial instruments ''belonging to the client'' (see CASS [[6.1.1 - CASS Provision|6.1.1]]. There must be some kind of agency or trust arrangement here. If your brokerage functions as [[riskless principal]], as many do, moneys and assets in the hands of the [[broker]] [[owes]] the client assets of money under a transaction; in the settlement period before it delivers them it is not holding assets or money under some kind of [[bailment]] arrangement.  
The first thing to note is this covers money and financial instruments ''belonging to the client'' (see CASS [[6.1.1 - CASS Provision|6.1.1]]. There must be some kind of agency or trust arrangement here. If your [[broker]] acts as a [[riskless principal]], as most do, moneys and assets in its hands are amounts it [[owes]] the client under a transaction. That is to say these are the broker’s liabilities; it is not holding assets or money under some kind of [[bailment]] arrangement.  


There is a limited case where there is a kind of bailment: where the client has expressly pre-funded the broker with cash or assets so the broker can make a DVP transaction as its agent with the street, and when it has done so the broker is holding the resulting cash or assets on the client’s behalf.
There is a limited case where there may be a kind of bailment: where the client has expressly pre-funded the broker with its own cash or assets so the broker can make a DVP transaction as its [[agent]] with the street, and when it has done so the broker is holding the resulting cash or assets on the client’s behalf. In this case the broker is not in the contractual flow, is not owed the assets or money, so can only be holding the assets as trustee (or — cough — banker).


As long as the transaction takes place through a [[commercial settlement system]], is intended to settle within one business day of the client's payment or delivery, and actually does settle within the “[[DVP window]]” (a period from the intended settlement date to the close of business on the third business day thereafter).
As long as the transaction takes place through a [[commercial settlement system]], is intended to settle within one business day of the client's payment or delivery, and actually does settle within the “[[DVP window]]” (a period from the intended settlement date to the close of business on the third business day thereafter).
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