All three terms are used to describe the securities settlement process and to explain how the delivery of securities from one party to another will take place.
Straight through processing (STP) is an initiative that financial companies use to optimise the speed at which transactions are processed. This is performed by allowing information that has been electronically entered into the VPS system to be transferred from one party to another in the settlement process without manually re-entering the same pieces of information repeatedly over the entire sequence of the settlement.
Delivery versus payment (DVP) is the most widely used payment transaction in which a trade will be settled against payment. In this type of transaction we must both match the counterparty’s securities, but also ensure that the purchaser of the securities have provided the means to pay, so the transaction can be completed.
Free of payment (FOP) is a delivery of securities which is not linked to a corresponding transfer of funds. In this case only the securities are moved. An example involving a FOP transaction could be a buyer and a seller that have agreed to settle the payment in a different manner that through the VPS Settlement. Other examples may be gifts, donations or inheritance.