It's local to your system, but it's based on UTC, which means that your local time zone does not affect it. So long as everybody's clock is reasonably close to correct, they should be seeing the same time of day ingame.
It's a 30-minute cycle, so it should still be the same even if the wrong time zone is set, unless it's one of the four places in the world that use a 15 minute offset in their time zone.