New Delhi, Oct. 15 -- 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...