We study the impact of technology on the reaction of financial markets to information, focusing on the foreign exchange market.We contrast the "thin-skinned" view that technological improvements cause markets to react more to new information with the "thick-skinned" view that they react less.We pinpoint exogenous technological changes using the timing of the connection of countries via the submarine fiber-optic cables used for electronic trading.Cable connections dampen the response of exchange rates to macroeconomic news, consistent with the "thick-skinned" hypothesis.This is in line with the view that technology eases access to information and reduces trend-following behavior.According to our estimates, cable connections reduce the reaction of exchange rates to U.S. monetary policy news by 50 to 80 percent.
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