What is the role of intermediaries in Delivery Against Payment transactions?

What is the role of intermediaries in Delivery Against Payment transactions?

• A. To provide final settlement of transactions
• B. To oversee and facilitate transactions on behalf of the client
• C. To sell securities directly to customers
• D. To prevent any form of payment

Answer: (B)

The role of intermediaries in Delivery Against Payment (DAP) transactions is to oversee and facilitate transactions on behalf of the client. This involves acting as a bridge between the buyer and seller, ensuring that the securities are transferred only when payment is received. Intermediaries, such as brokerage firms or financial institutions, handle the logistics and administrative processes, thereby enhancing the efficiency and security of the transaction.

By overseeing the exchange, intermediaries help to minimize risks associated with the transaction, such as default or miscommunication. They ensure that all parties fulfill their contractual obligations, which is essential for building trust in financial markets. Their involvement is particularly crucial in DAP transactions, as this mechanism relies on the simultaneous exchange of securities and payments to protect both parties involved.