What does delivery against payment (DAP) require from the client when shares are delivered?

What does delivery against payment (DAP) require from the client when shares are delivered?

• A. Payment prior to delivery
• B. No payment required
• C. Payment at the time of delivery
• D. Deferred payment for shares

Answer: (C)

Delivery Against Payment (DAP) is a trading arrangement in which the transfer of shares from the seller to the buyer is conditioned upon the payment occurring simultaneously with the delivery. This means that as the shares are handed over to the buyer, the buyer is required to make the payment at that very moment. This practice ensures that both parties fulfill their obligations concurrently, reducing the risk for both the seller and the buyer.

The structure of DAP is designed to enhance transaction security, allowing the seller to retain confidence that payment will be received at the time of delivery. This concept is critical for maintaining trust in financial markets and promoting smooth transactions. By requiring payment at the time of delivery, DAP inherently aids in preventing any potential disputes or complications that could arise from delays or failures to pay after the transfer of assets is completed.