A fee war has erupted in the ETF business with some of the largest providers including BlackRock’s iShares, Vanguard and Charles Schwab lowering costs for investors.

The firms are cutting expense ratios in diversified ETFs that give investors exposure to wide swaths of the market. [Schwab Takes the Lead in ETF Price War]

Although liquidity and trading spreads are important, many investors and advisors focus mainly on cost when differentiating between broad index-based ETFs. [The Shifting ETF Landscape]

Most of the industry’s assets reside in these “plain-vanilla” ETFs hitched to popular benchmarks such as the S&P 500, Dow Jones Industrial Average and MSCI EAFE. Also, the so-called Big Three of iShares, State Street and Vanguard together account for nearly 90% of ETF market share.

However, many smaller ETF firms are carving out a niche for themselves by going in the opposite direction with specialized ETFs or funds that appeal to short-term traders. Additionally, some companies are trying to stand out by incorporating elements of active management into their ETFs rather than simply tracking indices.

Invesco PowerShares, Van Eck, ProShares, WisdomTree, Guggenheim, First Trust, Direxion, Global X, ETF Securities, U.S. Commodity Funds, FlexShares, IndexIQ, AdvisorShares, Emerging Global Shares, RevenueShares, Teucrium, FactorShares, Northern Trust, GreenHaven and Exchange Traded Concepts are among these second-tier firms battling for market share.

Although fees cuts are good news for investors, S&P Capital IQ ETF analyst Todd Rosenbluth thinks expenses should be just one factor to consider when selecting funds.