A new front has opened in the exchange-traded fund price war: sector funds.

State Street Global Advisors

will slash the annual expense ratio of its nine sector funds by half, according to paperwork filed Wednesday with the

Securities and Exchange Commission

.

After the reduction, the expense ratios will range from 0.27% to 0.28% on the sector

Spiders, as they are known. These funds slice up the

S&P 500

index into nine industry groups, including: basic industries, consumer staples, consumer services, energy, cyclicals/transportation, industrials, technology, utilities and financials. Currently, the expense ratios range from 0.56% to 0.58%. The State Street filing says the lower rates will remain in effect for at least 12 months.

The move appears to be a reaction to

Barclay's Global Investors

, which disclosed fees on its new lineup of 35 exchange-traded funds in a filing last week. The first four of these Barclays funds, which will go by the moniker

iShares

, will launch Friday. The first two sector iShares, tracking telecommunications and financial services, will launch May 22. Another 10 sector funds will launch June 12. All will track

Dow Jones

sector indexes, and their annual expense ratios will be 0.60%.

Exchange-traded funds are similar to traditional mutual funds, except that they are priced continuously and can be bought and sold throughout the trading day. All the exchange-traded funds currently offered or proposed are index funds, and they trade on the

American Stock Exchange

, though the

New York Stock Exchange

is expected to get into the game as well.

Until now, the price competition was focused on funds that track the S&P 500 index. Barclays plans to charge just 0.09% in expenses for its

S&P 500

iShares, which launch Friday. That undercuts the cost of State Street's S&P shares, or Spiders

(SPY) - Get Report

, which was reduced to 0.12% in March.

``The price war is going to be on everything,'' predicts Boca Raton, Fla.-based financial planner Robert Levitt.

Indeed,

Vanguard's

entry into the exchange-traded-fund competition

last week brings one of the industry's pre-eminent low-cost providers into the game. Its

(VFINX) - Get Report

500 Index fund is one of the lowest-cost traditional S&P 500 index funds with an expense ratio of 0.18%. No price has been announced yet on the exchange-traded version of the index.