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Cables, Sharks and Servers
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Cables, Sharks and Servers

Technology and the Geography of the Foreign Exchange Market

Barry Eichengreen, Romain Lafarguette and Arnaud Mehl
ECB, 2016
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Editorial Rating

8

Qualities

  • Comprehensive
  • Analytical
  • Eye Opening

Recommendation

The ongoing disruptive effects of information and communication technology (ICT) transform industries and can determine how and where products and services get manufactured and delivered. Economists Barry Eichengreen, Romain Lafarguette and Arnaud Mehl analyze ICT’s impact on the sphere of foreign currency trading. Specifically, the team examines this market to determine whether ICT has concentrated trading activity in just a few large-scale geographic centers – such as London, New York and Tokyo – or whether it has diffused transactions across the globe. getAbstract recommends their robust, intriguing report to executives and policy officials looking to unravel the answer to a unique question.

Take-Aways

  • Underwater cables deployed in the late 1980s may hold the answer to whether information and communication technology (ICT) affects the delivery of services, specifically foreign exchange (FX) transactions.
  • Two theories – the “Flat World” hypothesis and the “Flash Boys” hypothesis – dominate the debate.
  • The latter posits that FX transactions increasingly will cluster in the primary trading cities of London, New York and Tokyo, aided by submarine cable connections and “data-matching servers.”

About the Authors

Barry Eichengreen is an economics professor at the University of California, Berkeley. Romain Lafarguette is an economist at the International Monetary Fund. Arnaud Mehl is an economist at the European Central Bank.

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