This paper makes use of the special information disclosure system of IPO bids in China to study whether there is systematic collusion among institutional investors. We find that institutional investors’ bids under registration system are obvious clustered around the mode bid. Besides, the probability of same bid prices among institutional investors belonging to a “core” group is significantly higher. The above evidence is highly consistent with the hypothesis that there is systematic collusion among institutional investors.The high price elimination system destroys the competition mechanism of the auction system, which is the fundamental reason for the systematic collusion.The collusion reduces the information content of the bids of institutional investors and lowers the IPO pricing, which ultimately results in resource misallocation in the primary market. Further research shows that hiring underwriters with higher reputation and increasing QFII’s participation in IPO bids can effectively restrain the collusion.