A recent ECB paper astutely notes that the global undersea cable network than began in the late 1980's was a key factor in the development of high speed currency trading, and that the next wave of more advanced cables and technologies may further alter the currency trading landscape.
The dominance of financial centers such as London, New York and Tokyo in the $5 trillion-a-day global currency market may face challenges from landlocked cities as new technology erodes the advantage offered by high-speed undersea cables. A European Central Bank research paper says these three centers, along with Singapore and Hong Kong, dominate the industry in part because of the history of submarine cables that have made high-frequency trading possible. The ECB paper, however, says recently installed cables connecting landlocked cities have the potential to lure back high-frequency traders, who contribute about a third of trading. It cited Spread Networks' cable between the data centers of the Chicago Mercantile Exchange and NASDAQ in New Jersey and euNetworks' fiber network route between Frankfurt and Zurich, a major center for trade in the Swiss franc, the world's fifth most traded currency.