Exchange-traded funds (ETF) are increasingly popular among investors, and ETF sponsors now command more than $1 trillion in assets under management (AUM). ETF sponsors have capitalized on this expanding market with numerous product launches. But when there is little to differentiate ETFs that occupy the same investment niche, ETF sponsors are forced to compete on cost by reducing their expense ratio.

Brokers are competing in a similar manner for ETF investors’ assets. Over the past year, numerous brokers have begun to offer commission-free ETF trading in an attempt to become the preferred platform for ETF investors. These commission-free deals help brokers grow their business, while ETF sponsors rake in more assets under management.

Brokers’ commission-free programs also remove a key performance hurdle for ETFs. Mutual fund investors have long understood the role expenses play in eroding long-term performance. Many mutual fund investors are also accustomed to adding to their mutual fund holdings with low or even no transaction costs when they purchase shares directly from the fund company. So commission-free programs now enable investors to dollar-cost average with ETFs, just as they do with mutual funds.

Charles Schwab offers commission-free online trading for its lineup of 15 Schwab-branded ETFs. Fidelity does the same for 30 iShares ETFs, while Vanguard offers free trades for its 46 in-house ETF offerings. Overall, TD Ameritrade has the most comprehensive lineup of commission-free ETFs, with more than 100 ETFs eligible for commission-free trading.

TD Ameritrade’s extensive roster includes a broad selection of iShares ETFs, many of which are country-specific plays. Additionally, their offerings include bond ETFs, US-based equity index ETFs, as well as ETFs from Vanguard, SPDRs and a handful of specialty funds. For investors who want exposure to international ETFs, TD Ameritrade is the clear winner.

For sector investors, Vanguard’s array of 11 sector ETFs is broad enough to pursue a sector rotation strategy or simply achieve diversification.

In terms of expense ratios, Vanguard and Charles Schwab are nearly at parity. Schwab has consistently cut the expense ratios on its ETFs, and several of its offerings are now the lowest-cost options in their categories.

It’s also important to consider account restrictions when selecting a commission-free ETF broker.

Vanguard Brokerage may restrict an investor’s account for 60 days if they trade the same Vanguard ETF more than 25 times over a 12-month period. For standard accounts with less than $50,000, Vanguard charges a $7 commission for the first 25 trades, $20 for each subsequent trade, and an annual $20 account service fee.

Under TD Ameritrade’s program, investors who hold ETFs for less than 30 days that were originally purchased commission-free will be charged a short-term trading fee of $19.99. Standard commissions at TD Ameritrade are $9.99 for online orders for stocks and all other ETFs. There’s no tiered pricing regime aside from TD’s Apex program, under which investors who average five or more trades per month over a three-month period, or who maintain a minimum total account value of $100,000, avoid service fees and gain access to a deeper pool of research.

When comparing these commission-free offers you should consider your investment style and the available funds. If you’re running an asset allocation strategy that requires frequent rebalancing, Vanguard might be the best option. Vanguard’s in-house ETFs have extraordinarily cheap expense ratios, and provide access to numerous sectors and indexes. If you’re focused on international investment, TD Ameritrade is probably the best choice.

What’s New

Three new ETFs were launched last week.

iShares MSCI Emerging Markets EMEA Index Fund (NSDQ: EEME) and iShares MSCI Emerging Markets Latin America Index Fund (NSDQ: EEML) are both typical market-cap weighted index funds with little differentiating them from a number of funds focused on the same geographies. Each fund charges a 0.49 percent annual expense ratio.

iShares MSCI Singapore Small Cap Index Fund (NSDQ: EWSS) is a bit more unique because it’s the first ETF to focus exclusively on small caps in the Asian city-state. The ETF charges a 0.59 percent annual expense ratio.

Portfolio Roundup

There was no portfolio-specific news last week.