Citigroup has closed its market making business in retail options, in a move that underscores how the boom in zero-commission trading has squeezed the profitability of the industrys middlemen.

The bank closed the business, which serves retail broker-dealers such as charles schwab and fidelity, at the start of last month, according to three people with knowledge of the decision. however, citi has maintained its market making operations for institutional investors and high-net-worth customers, the people said.

Its decision to pull out of retail options leaves morgan stanley as the sole major wall street bank in the business, which is dominated by market makers such as citadel securities, susquehanna, simplex trading and optiver.

Citi pulled out because it was unable to compete in a technology arms race to be among the fastest and most reliable venues on wall street, people familiar with the talks said.

Citi does periodic reviews of its business lines, the company said. as part of its review of derivatives it was determined to exit the servicing of broker dealers for option executions. the resources are better redeployed to serve clients in other areas of our equities division.

Column chart of single name us equity options average daily trading volume (m) showing equity options hit new peak in august

The banks decision to withdraw from the market came in the middle of a boom in us options trading that reached fever pitch in august, fuelling the stock market rally and increasing hedging costs for market makers.

Frantic buying of options in stocks such as apple and tesla helped to drive up the price of the shares as market makers offset their positions by purchasing the underlying stocks. the action was stoked by heavy buying from softbank, the japanese investment company dubbed the nasdaq whale for making big bets on tech stocks through the options market.

The average daily trading volume in single-name us equity options hit a record 18.4m in august, according to data from cboe.

Many market makers, who try to buy and sell assets in the market, have been suffering from a fierce battle for retail investors that has erupted among online brokers such as charles schwab, etrade, interactive brokers and robinhood. as these brokers have offered low-cost, or sometimes zero-fee trading to entice retail investors, they in turn have squeezed the profits of the market makers.

Citi is also in the midst of change. the bank is cutting staff to reduce costs and this month appointed jane fraser, its president, to replace chief executive michael corbat. she will be the first female chief executive of a wall street bank when she assumes the role in february.

Line chart of single-lot options as proportion of all individual-name options (%) showing rising number of small options trades suggests retail investors have been very active

The retreat of the wall street banks from retail options market making mirrors the way hyper-fast computerised traders have loosened the banks hold on the equities market.

Companies such as citadel and virtu have elbowed the banks aside to grab the largest slices of the us retail share trading market. in 2016 citigroup sold its automated market making operation for equities to citadel.

One reason morgan stanley remains in the business is because of its large wealth management offering and the sizeable amount of options orders generated by etrade, one of the big online retail trading platforms the bank acquired earlier this year. morgan stanley declined to comment.