The two payments do not have to be strictly simultaneous. PvP works as long as the legal, contractual, technical, and risk management framework ties each payment to the final payment of the other. Settlement can be on a gross basis, trade by trade, or on a net basis1.

Consider a hypothetical example in which Bank A buys USD 10 million from Bank B at 150 yen per dollar. With PvP settlement, if Bank B cannot pay the dollars, Bank A's yen payment is not made either, so the loss of 1.5 billion yen is avoided. The cost of replacing the trade at current market prices and the liquidity risk of not receiving a currency when expected remain2.

PvP is a different function from that of a central counterparty, which steps between the parties and assumes their obligations. It follows the same idea as delivery versus payment (DvP), which links the delivery of securities and the payment of cash, but applies to two currencies1.

Notes

  1. "金融市場インフラのための原則（仮訳）" (Principles for financial market infrastructures, provisional Japanese translation, in Japanese), Principle 12, explanatory notes 3.12.3 and 3.12.4 and footnote 113, pages 108–109. ↩ ↩2

  2. Bank for International Settlements, "Uncovering FX settlement risk: new measures from the 2025 BIS Triennial Survey" (BIS Quarterly Review, June 2026), section "The 2025 methodology for assessing FX settlement risk". ↩