What differentiates the institutional investor from the retail investor is the large block buys the institutional investor makes. While individuals and small groups comprise the retail sector, banks, mutual funds and other “elephants” make up the institutional sector.
According to StreetAuthority.com, “On any given day, institutions usually account for the vast majority of the trading volume on major exchanges such as the NYSE, AMEX, and NASDAQ.”
Streetauthority.com states, “Retail investing activity pales in the shadow of institutional investing activity. Not only do retail investors make smaller trades, they also tend to trade less frequently than institutional investors, which account for most of the market's trading volume.”
The institutional investor has enormous resources to aid in making investment decisions. When an institution decides to buy large blocks of shares in a company retail buyers typically follow suit.
An elephant is an institution with enough funds to make large volume trades. As explained by Investopedia, “Think of a swimming pool: if an elephant steps into the pool (buys into a position), the water level (stock price) increases; if the elephant gets out of the pool (sells a position), the water level (stock price) decreases. In comparison to the elephant's influence on stock prices, the effect of an individual investor is more like that of a mouse.”
Because institutional investors are considered more educated in the financial market, they are subjected to fewer SEC regulations than the retail investor.