Oaktree Capital on the Hunt for Compliance System

Oaktree Capital Management, which initiated a hefty trade automation push at the beginning of the year, is hot on the trail for an automated trade compliance system. The L.A.-based firm with about $17 billion in assets under management has already spoken with the MacGregor Group and Charles River Development, and is considering a to-be-released stand-alone compliance system by CAI Technology Group.

Although impressed with Charles River's system, Compliance Master, Ric Reyes, project manager, says the price may just be too high for the medium-sized firm. "The pricing structure is probably geared more towards fairly large investment management-type operations," Reyes adds. "The Charles River system is a good system, but we're going to keep looking for another vendor because licensing requirements are pretty steep."

Commenting on the MacGregor Group's compliance system, Reyes voiced a sentiment heard throughout the industry about many pre-trade compliance systems: the module cannot be unbundled from the order management system (OMS). Oaktree has been upgrading its own proprietary trading system for the past couple of months-improving the graphical user interface and porting the back end from Microsoft Access to Microsoft SQL Server-and has no need for a new OMS.

Hence Reyes interest in CAI Technology Group's ESTAC (Enter-prise-Wide Stand-Alone Compliance), what stands to be the industry's first, enterprise-wide, stand-alone compliance system. The product is not set to be released until the end of the year, but Reyes intends to keep ESTAC on his radar screen if he is unable to find a suitable compliance system before then. "Obviously they won't have a product for some time, but I want to keep them on my list of potential providers just in case between now and then, nothing comes out of the many discussions we plan to have," he adds.

Oaktree's search for a compliance system represents part of the second phase of its trade automation push. Along with upgrading its order management system to a true client-server architecture, which will be accomplished with the port to SQL, the money manager is also redesigning the system's trade input screens and trade blotters. In addition to the new compliance system, Oaktree intends to automate allocations.

Why the desire to maintain a proprietary order management system, when a slew of vendor provided solutions have proliferated the marketplace over the past couple of years? Reyes explains that no vendor system effectively handles high-yield bonds and convertible securities, Oaktree's bread and butter.

This entire technology revamp is, understandably, an effort to prepare for the shortened T+1 settlement cycle. "The industry is supposed to be ready in the middle of 2001, but we'd like to be ready before that," Reyes says.