On Thursday, Securities and Exchange Board of India (Sebi) said that 63 Moons has been offering STP services without its approval and allowed the company to provide such services for three more months to clients in order to avoid any possible disruptions for securities market participants.
Generally, financial firms use STP to pass information electronically in order to optimise the speed at which they process transactions. This eliminates the need for a hands-on re-entry of data that has already been completed at the source.
The watchdog's directions were part of an order wherein it rejected 63 Moons' application seeking renewal of approval to provide STP services on the basis of 'fit and proper' criteria.
"63 Moons has always had utmost faith in the judiciary and will be taking appropriate legal action in the higher judiciary forum," the statement said.
Earlier known as Financial Technologies (India) Ltd (FTIL), 63 Moons, on April 25, 2016 sought approval to act as a STP service provider for the period from June 30, 2016 to June 29, 2019.
In the 23-page order on Thursday, Sebi Executive Director Anand R Baiwar rejected the application for renewal of approval relating to the period from April 17, 2018 to June 29, 2019. The rejection is on the basis of 'fit and proper' criteria.
According to 63 Moons' statement, the 'fit and proper' order passed against the company in 2014 specifically deals with barring persons or entities from holding equity stake in any exchange platform and has no bearing on providing technology services.
The order has been challenged in the court of law and the matter is sub-judice, it added.
The company stressed that Sebi's latest order is only related to STP services and has nothing to do with any other technology services by the group.
"Sebi coming out with such an order after over seven years, especially when the issue of fit and proper is still sub-judice will be disturbing the smooth functioning of the market," it said.
It also said that allegation of undue influence of promoter is unfounded.
Shares of 63 Moons were down nearly five per cent at Rs 85.35 in afternoon trade on the BSE.