New Delhi, Oct. 5 -- By Jayshree P Upadhyay

MUMBAI, Oct 5 (Reuters) - India's markets regulator will partly reverse plans to overhaul the mechanism used to determine the closing prices of key stocks and derivative contracts linked to them, two sources with direct knowledge of the matter said.

The Securities and Exchange Board of India last month introduced a new mechanism called the closing auction session, or CAS, for stocks that have futures and options contracts linked to them.

Under this system, a short auction at the end of the trading day helps determine the closing price of a stock. The new process, similar to that used in global markets including theUS and Hong Kong, has led to sharp swings in derivatives prices on expiry days,...