If they did lock up half the bitcoins in a known location, and allowed the institutional investors to invest in them, then for one thing the price would skyrocket, but I think the price would also be more stable after the initial jump? Would it cut down on the volatility, or would it amplify the volatility?

Part of me is also suprised nobody has done this yet. The vast majority of bitcoin traders are just speculating and investing and don't actually want or need the physical coins. If some wallstreet hacks did do this you could simply log on with your online banking software and instantly trade bitcoin commodity to your heart's content and there wouldn't be any goxxing going on dropping the value. But on the other hand we'd be at the mercy of big banks and hedge fund managers.

I guess your right the price would skyrocket but I could see it jumping all over the place like gold does at $16 drops in a few seconds.

It would be cheap to administer. Not like gold where you need professional audited max security storage. A bitcoin commodity fund you'd need printed paper and a safety deposit box.

No btc tracker on the stock market please. That will attract shorters, and that causes more speculation and pumps and dumps.
But the btc market is still too thin for it anyway