ED uses a p2p 'island system'
Take a particular station.
If you are playing solo online, the station and all the AI ships are created and managed by your PC. The central server is only used to tell your PC stuff like prices, missions, galnet news.
If you play with another player, your two pc's share responsibility for the management of the in game stuff, and they talk directly to each other. The central server only handles the prices, docking permission etc.
If a third player joins, the same happens, with the player pcs all talking directly to each other.
This group is called an island and you can only see other players in your island.
The central server brokers 'matchmaking' to decide which island to put you in. One of be criteria is how good your direct connection to other players in the island is. If you were in NZ then a direct connection with other NZ players is more likely.