mumbai, Oct. 16 -- The Securities and Exchange Board of India (Sebi) on Thursday pulled back the two-month-old closing auction framework for settlement of derivatives contracts, after it led to abrupt price swings and uncertainty on expiry days. In a late-night circular, the market regulator said that the closing price will be calculated based on a 30-minute volume-weighted average price (VWAP) on derivatives expiry days i.e. Tuesday and Thursday. Sebi reviewed the framework through a consultation paper in September, following pushback from market participants over a liquidity squeeze during the auction. The paper outlined two options for calculating closing prices on derivatives expiry days: adopt a blended VWAP-based methodology or retain the existing VWAP calculation based on the last 30 minutes of continuous trading on settlement days for at least a year. Unlike a simple average, VWAP takes into account both the price and volume of trades. For instance, if 100 shares are traded at Rs.10 each and 50 shares at Rs.12 each, the WAP is Rs.10.67, compared with a simple average price of Rs.11. On the other hand, a CAS uses an auction to match orders and derive the closing price.Many market participants have urged Sebi to retain VWAP-based settlement pricing on expiry days-Tuesday for Nifty options and Thursday for Sensex options-and introduce blended pricing on non-expiry days for a year before transitioning fully to the blended framework. CAS, introduced in August, led to abrupt price swings on expiry day, making it difficult for traders to participate in the futures and options (F&O) segment. htc...