Mutual fund portfolio managers might want to think twice before investing in shares of NYSE Group, which began trading Wednesday, MarketWatch reports. The Securities and Exchange Commission might require funds that own 5% or more of the stock to get its approval before sending trades to the Big Board.

The reason is the SEC might view it as a conflict of interest. If a fund company owns a trading system, it might be influenced to send its trades there to help boost its business, explained shareholder advocate Mercer Bullard.

He expects the SEC will decide whether to require fund companies that own shares in NYSE to seek its approval before sending trades there, or, possibly, make an exception to the practice by putting it under the same exclusionary rules that apply to fund companies with affiliated brokerages. The SEC allows funds to send trades to affiliated brokerages, with some restrictions. However, Bullard added, he didn't think the SEC would make these exceptions, since exchanges are different from brokers.

"If I were a mutual fund manager who owned 5% of the New York Stock Exchange, I'd want to know what the SEC thinks of the permissibility of the fund continuing to own the exchange," Bullard said.

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