All three properties identified by Ben Owen in his analysis of central counterparties (CCPs) are accurate.

Property I (Correct): The counterparty risk is not eliminated from the system but is transferred from one party to the CCPs. This is a fundamental aspect of how CCPs operate. They act as intermediaries between parties in a transaction, assuming the counterparty risk. However, this does not mean that the risk is eliminated from the system. Instead, it is transferred to the CCPs.

Property II (Correct): CCPs are susceptible to failure. Like any other financial institution, CCPs face various risks, including operational, credit, and liquidity risks, which can lead to their failure. There have been instances in the past where CCPs have failed, and governments have had to intervene to bail them out.

Property III (Correct): In times of economic adversity, when CCPs increase the initial margin requirements, the liquidity of financial institutions already facing liquidity shortages is likely to deteriorate further. This is because, during such times, CCPs need to ensure that they have sufficient liquidity to meet their obligations. Therefore, they may increase the initial margin requirements and default fund contributions. However, this can exacerbate the liquidity problems of financial institutions that are already facing liquidity shortages.

Why the other choices are incorrect:

• Choice A is incorrect because it omits Property III regarding the exacerbation of liquidity issues during economic downturns.
• Choice B is incorrect because it fails to acknowledge Property I: the counterparty risk does not disappear; instead, it shifts from one party to the CCPs.
• Choice C is incorrect because it neglectfully excludes Property II, which states that like any other financial institution, a central counterparty can also fail.