Vanguard Fires ETF Pricing Shot Across the Bow

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Vanguard , already the exchange traded fund ( ETF ) industry's low-price leader, is now waging a pricing war on another front now: its brokerage platform.

Vanguard has slashed costs for its brokerage clients by offering them commission-free transactions on its already dirt-cheap line of ETFs and lowered commissions on trades of non-Vanguard ETFs. From now on:

  • There are no trading commissions on Vanguard's lineup of 46 ETFs
  • Commissions to trade all other ETFs and stocks on Vanguard's platform will range between $2 and $7

Vanguard has always been a competitive player in the ETF space, with competitive pricing, an excellent brokerage platform and solid indexing that has long set it apart. With an average expense ratio of 0.18%, those low prices have been paying off handsomely for the provider in recent months. Since March 2009, Vanguard's assets under management have swelled from $43.3 billion to $103.7 billion, making it the third-largest ETF provider in the world. The average ETF expense ratio is 0.52%. [ How Low Can ETF Fees Go? ]


This move follows quickly on the heels of other price-slashing moves made by other ETF providers and brokerages in recent months. When Charles Schwab unveiled its new ETFs, the brokerage also announced that the funds would trade commission-free on the Schwab platform while all other ETFs trade for $8.95. Fidelity followed up by announcing $7.95 commissions and free trading of 25 iShares ETFs on its platform. [ Schwab Hits An Asset Milestone. ]

Other brokerages also offer appealing pricing to their customers: TD Ameritrade charges $9.99 a trade; E*Trade charges $12.99 for customers with less than $5,000 in assets under management.

Now that ETFs account for 50% of all trading on exchanges, the game is on. Vanguard's lowered brokerage commissions represent an all-out fight for self-directed ETF investor assets - not just people who use Vanguard ETFs. [ The ETF Price Wars. ]

This battle is going to do nothing but intensify, and the winner could very well be you.

For more stories about the ETF industry, visit our page .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , ETFs

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