Think tank warns US markets face hidden infrastructure risks

A new report from the Institute for Critical Infrastructure Technology (ICIT) warned that U.S. financial markets rely on a small number of highly concentrated physical and digital infrastructure hubs, creating systemic risks that could ripple through the broader economy if disrupted.

The report, "The Hidden Infrastructure Powering America's Markets," argued that while investors interact with markets through digital trading platforms, the underlying systems that support trading, settlement and market operations are clustered in a handful of data centers in northern New Jersey, including facilities in Secaucus, Carteret and Mahwah. According to the authors, those sites serve as key connection points for exchanges, trading firms, financial market utilities and network providers.

ICIT said the geographic concentration delivers efficiency and low-latency trading, but also creates shared dependencies. A disruption affecting power, connectivity or operations in the corridor could affect trading, price formation and market liquidity across U.S. markets, with potential global consequences.

The report identified Financial Market Utilities (FMUs) as another major concentration point. Organizations such as the Depository Trust & Clearing Corporation (DTCC) and the Options Clearing Corporation (OCC) perform critical clearing, settlement and counterparty risk functions. ICIT warned that disruptions to those institutions could undermine settlement certainty, collateral flows, liquidity and confidence in the financial system.

Beyond exchanges and clearinghouses, the report highlighted risks stemming from shared infrastructure providers, including data centers, cloud platforms, telecommunications carriers and software vendors. Because multiple financial institutions depend on the same providers and physical locations, a single failure could cascade across markets, the authors said. They also noted that emerging technologies such as artificial intelligence and quantum computing could increase the sophistication of attacks targeting critical infrastructure.

To illustrate the potential impact of infrastructure failures, the report pointed to the Sept. 11, 2001, terrorist attacks, which forced U.S. markets to close for nearly a week after financial infrastructure was damaged. When trading resumed, the Dow Jones Industrial Average fell more than 7% in one day, contributing to an estimated $1.4 trillion loss in market value over several days.

ICIT concluded that strengthening financial infrastructure resilience will require greater coordination among government agencies, infrastructure operators and the investment community, along with sustained investment, board-level oversight and ongoing resilience testing to reduce systemic risk.

Download the ICIT report "The Hidden Infrastructure Powering America's Markets" here: https://www.icitech.org/post/the-hidden-infrastructure-powering-america-s-markets-concentration-interdependency-and-systemic-r