Institutional investor has become the mainstream in the security market.With the security market developing,the shares that institutional investors hold reach 40% and the effect on security market quality is increasing.But wether the operation of investing fund can improve the market quality still need to further test. The security market quality was defined and liquidity and volatility were choosed as testing indicators to investigate the effect which funds cause in security market.Therefore the validity of institutional investors in securities market can be verified by enhancing the liquidity and reducing volatility.And the conclution is that in the non-bullmarket the operation of institutional investors can enhance the liquidity of market.