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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Delivery Versus Payment (DVP) on CSE!

Delivery Versus Payment (DVP) on CSE!

+10
sajeethk
chamith
jks
seyon
roshanalv
zen
Slstock
innam
bakapandithaya
godswen
14 posters

Go down  Message [Page 1 of 1]

1Delivery Versus Payment (DVP) on CSE! Empty Delivery Versus Payment (DVP) on CSE! Tue Sep 27, 2011 2:48 pm

godswen

godswen
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Did yall see the new announcement! So it's gonna be; you pay first then you get the shares! Twisted Evil

So no more day trading?

http://www.cse.lk/cmt/upload_cse_announcements/7821317101794_.pdf

bakapandithaya

bakapandithaya
Vice President - Equity Analytics
Vice President - Equity Analytics
This is good improvement, poor retailers can't buy on credit. So, no credit clearance

innam

innam
Manager - Equity Analytics
Manager - Equity Analytics
@godswen wrote:Did yall see the new announcement! So it's gonna be; you pay first then you get the shares! Twisted Evil

So no more day trading?

http://www.cse.lk/cmt/upload_cse_announcements/7821317101794_.pdf

Actually day trading can still take place but you may need to have a margin account or a credit balance in your account in order to make payment for the buy side of the transaction, once you make the sale the proceeds will net off the margin/credit to your account.
That is the theory but the CSE/SEC has a tendency to muck things up when it comes to practise.

godswen

godswen
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@innam wrote:
Actually day trading can still take place but you may need to have a margin account or a credit balance in your account in order to make payment for the buy side of the transaction, once you make the sale the proceeds will net off the margin/credit to your account.
That is the theory but the CSE/SEC has a tendency to muck things up when it comes to practise.

And do we really need DVP here in CSE?

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
"Payment at the moment of delivery".[1] Delivery versus payment or DVP is a sale transaction of negotiable securities (in exchange for cash payment) that can be instructed to a settlement agent using SWIFT Message Type MT 543 (in the ISO15022 standard). Use of such standard message types is intended to reduce risk in the settlement of a financial transaction, and enable automatic processing. Ideally, title to an asset and payment are exchanged simultaneously. This may be possible in many cases such as in a central depository system such as the United States Depository Trust Corporation

http://en.wikipedia.org/wiki/Delivery_versus_payment



It does not mean that Broker Credit ( ateast for T+3) needs be abolished. If it does that means

i) first you need to put money into your account before buying
or
ii) need to have account balance after selling

I am not sure whether it is necessary or feasible to make it that strict. Retailer Day trading can reduce immensely then. Day Trading is also necessarily for market sustenance.

Interpreting from the article above, with DVP it seems that your broker can pay for you also ( with T+3). Maybe it does not have to be strict as above. Idea of DVP appears to be for a better management system.

Let see how they are going to implement this and not mess CSE again with too drastic measures all of sudden. But If implemented rationally with limited flexibility this might be actually curb manipulators somewhat.

ps : Okay I just saw Innam response. Margin account can also fit within the system. But how many retailer have margin accounts?





Last edited by slstock on Tue Sep 27, 2011 3:44 pm; edited 1 time in total

innam

innam
Manager - Equity Analytics
Manager - Equity Analytics
@godswen wrote:
And do we really need DVP here in CSE?

if you want a market of investors, DVP (IF implemented properly) can be a good thing.

if you want a market of manipulators/pump & dumps, DVP is a bad thing.

zen

zen
Manager - Equity Analytics
Manager - Equity Analytics
Gyuz I don't understand.. What's the difference between this and the current system? When I buy shares, my 'cash available for withdrawl' goes down and the 'portfoilo value' goes up. When I sell, it happens vise versa. What's the difference?

roshanalv

roshanalv
Manager - Equity Analytics
Manager - Equity Analytics
Introduce on mid 2012, so not to worry now

seyon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@zen wrote:Gyuz I don't understand.. What's the difference between this and the current system? When I buy shares, my 'cash available for withdrawl' goes down and the 'portfoilo value' goes up. When I sell, it happens vise versa. What's the difference?

What i understand ,this system way of controlling the risk in securities mkt. simply DVPS means changes of ownership of particular share is transferred while the payments is made. Eg. If u purchase 1000 JKH @ Rs.300, You have to settle 300,000, till the payment is made ( within stipulated time period eg: T+3), the purchased qty will not credit ur CDS A/c and sametime will not debit counterparties CDS A/c. till that 1000 JKH will show as shadow balance. If u failure to settle the payment, this particular trade will be canceled.

In short if u have money only u can make trade.

Related Discussion

http://forum.srilankaequity.com/t5305-how-dvps-delivery-versus-payment-system-will-benefit-to-cse

10Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Tue Sep 27, 2011 5:50 pm

zen

zen
Manager - Equity Analytics
Manager - Equity Analytics
So it only affects people who use margin? If that's the case, it's good. It makes the market more predictable, trends will not be interrpupted and we won't have face times like these.

But what happens to a guy who sell to a person who isn't paying on the spot. A sale happens but it could be cancelled???

11Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Tue Sep 27, 2011 8:58 pm

jks


Equity Analytic
Equity Analytic
If u failure to settle the payment, this particular trade will be canceled.

this is really happen we never loss if shares price goes down payment made to stock broker not paid transaction cancelled.we win seller goes bankrupt.

12Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Tue Sep 27, 2011 9:59 pm

seyon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@zen wrote:So it only affects people who use margin? If that's the case, it's good. It makes the market more predictable, trends will not be interrpupted and we won't have face times like these.

But what happens to a guy who sell to a person who isn't paying on the spot. A sale happens but it could be cancelled???

This system will badly affect the manipulators and the traders like NP & DJ, At present these guys can place the orders even if they don't have sufficient fund or margin, these guys might have some arrangement with the brokers. But after introduction of DVPS, the system will allow even to place the orders if u have a fund or margin. Yes that is way the system is designed.

Now u can see ur CDS a/c and ur account ( broker calls as back office) are not linked. But in DVPS Security transfer system ( CDS a/c) and fund transfer a/c ( ur a/c) will be linked. So when u placing the order or buying, system will identify whether u have suffciant fund ( basically our online trading and buying power )

However this system will differ from country to country, in some place system will allow u to buy, once u make the payment (T+3) stock will transfer to ur CDS a/c, until it will show as shadow balance, if u are default to pay, then the particular transaction will be canceled.

will see How CSE is going to introduce this system. I am very much happy about this system..

13Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Tue Sep 27, 2011 11:21 pm

chamith

chamith
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
This is how it take place in LSE.
You have to have money in your a/c to buy.

So the payment is secure.
In the positive side i believe this would somewhat bring an end to force selling. As long as force selling is there, its hard for a market to stand up.

14Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Sep 28, 2011 6:57 am

sajeethk


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
May be some of CSE head peoples want have free tour to India coming months using CSE money. cos since trading volume go out they have good money.....

Hope end of the day will not come with nothing....

15Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Jun 23, 2021 1:00 pm

Kaish86


Manager - Equity Analytics
Manager - Equity Analytics
DVR again. If i sell something at profit, and on 3rd day during settlement if the share price is not favouring buyers earlier decision and he refuses to settle will the original trade us cancelled. How the seller get his money for his original decision. This is unfair.
Current system either buyer pay or not seller is guaranteed of cash since broker has to pay on his own account. Is DVR is simply transferring settlement risk of the broker to the seller.

Can anyone explain on my 1st paragraph

16Delivery Versus Payment (DVP) on CSE! Empty DVP Wed Jun 23, 2021 1:03 pm

Kaish86


Manager - Equity Analytics
Manager - Equity Analytics
If i sell something at profit, and on 3rd day during settlement if the share price is not favouring buyer's earlier decision and he refuses to settle, will the original trade is cancelled. Can't seller get his money for his original decision. This is unfair. 

As per Current system either buyer pay or not, seller is guaranteed of cash since broker has to pay on his own account. Is DVP is simply transferring settlement risk of the broker to the seller. 

 Can anyone explain on my 1st paragraph

17Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Jun 23, 2021 3:41 pm

samaritan


Moderator
Moderator
@Kaish86 wrote:If i sell something at profit, and on 3rd day during settlement if the share price is not favouring buyer's earlier decision and he refuses to settle, will the original trade is cancelled. Can't seller get his money for his original decision. This is unfair. 

As per Current system either buyer pay or not, seller is guaranteed of cash since broker has to pay on his own account. Is DVP is simply transferring settlement risk of the broker to the seller. 

 Can anyone explain on my 1st paragraph
A question may be raised due to fear, uncertainty & doubt. Similarly, same question may be raised to create fear, uncertainty & doubt. One should have the wisdom to know the difference, given the fact that this same question has been posted under three different threads. Delivery Versus Payment (DVP) on CSE! Icon_lol


_________________




The biggest risk in life is not taking any risk at all.

Mr. X likes this post

18Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Jun 23, 2021 3:59 pm

Kaish86


Manager - Equity Analytics
Manager - Equity Analytics
I posted in 3 forum bcz i wanted to know the answer atleast in one of the 3 forums. Since i didn't get answers for my previous posts in other subjects.
Its a very straightforward question that who will pay me when the buyer (who does not have margin facility) not settles on 3rd day. If you know the answer pls provide without saying go and see YouTube, as you replied in the another forum.

For your information, im not a big fish to collect shares by creating panic in the market. Anyway thanks atleast you provided some feedback.
Any other member who can clear my doubt.

samaritan likes this post

19Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Jun 23, 2021 5:41 pm

samaritan


Moderator
Moderator
@Kaish86 wrote:If i sell something at profit, and on 3rd day during settlement if the share price is not favouring buyer's earlier decision and he refuses to settle, will the original trade is cancelled. Can't seller get his money for his original decision. This is unfair. 

As per Current system either buyer pay or not, seller is guaranteed of cash since broker has to pay on his own account. Is DVP is simply transferring settlement risk of the broker to the seller. 

 Can anyone explain on my 1st paragraph
The buyer cannot retract and hence the trade will not be cancelled. The buyer's broker is bound to sort out any issues that may arise from the trade with the buyer. You will get your payment. Any comments from others?


_________________




The biggest risk in life is not taking any risk at all.

20Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Jun 23, 2021 6:56 pm

niru


Manager - Equity Analytics
Manager - Equity Analytics
Trade can be cancelled.


No security movement from seller's account.


But, Seller will be compensated for the 3 day price loss and opportunity loss.

CDS will charge this compensation from buy broker, buy broker may charge it from buyer.

Compensation amount = qty x Max(0,P) + 0.8% of transaction value

P = sale price - highest trade price between trade date settlement date

21Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Jun 23, 2021 7:11 pm

xhunter

xhunter
Moderator
Moderator
@niru wrote:Trade can be cancelled.

But, Seller will be compensated for the 3 day price loss and opportunity loss.

CDS will charge this compensation from buy broker, buy broker may charge it from buyer.

Compensation amount = qty x Max(0,P) + 0.8% of transaction value

P = sale price - highest trade price between trade date settlement date
probably this might be only applicable for pre arranged transaction. 
anyway 
P = sale price - highest trade price between trade date settlement date
is also probably incorrect.
at least it should be   the lowest price recorded in between those two days.

where we can find these information from?

it is fair to consider
p = highest price recorded - lowest price recorded
theoretically seller could have sold them for the highest price , but now he/she might be selling for the lowest price , so the opportunity cost can be that much of amount.

22Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Wed Jun 23, 2021 8:45 pm

samaritan


Moderator
Moderator
There is a link below, where reference is made about buyer's settlement bank as well.


https://www.cse.lk/pages/dvp-video/dvp-video.component.html


_________________




The biggest risk in life is not taking any risk at all.

23Delivery Versus Payment (DVP) on CSE! Empty Re: Delivery Versus Payment (DVP) on CSE! Thu Jun 24, 2021 10:56 am

niru


Manager - Equity Analytics
Manager - Equity Analytics
@niru wrote:Trade can be cancelled.


No security movement from seller's account.


But, Seller will be compensated for the 3 day price loss and opportunity loss.

CDS will charge this compensation from buy broker, buy broker may charge it from buyer.

Compensation amount = qty x Max(0,P) + 0.8% of transaction value

P = sale price - highest trade price between trade date settlement date

Sorry, P should be as follows 


P = sale price - Lowest trade price between trade date settlement date

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