Not unusual for a MM to sell shares not in inventory to provide "orderly" market and order flow. Upgraded SEC regulations require MM to cover such "phantom" shares T+3, i.e., by settlement date. If short-sold shares not covered (borrowed or purchased) at outset of first trading day after settlement date, a "fail to deliver" is noted. At which point, RegSHO comes into effect. MM cannot then short sell stock in question until fail-to-deliver is closed out. All in theory, of course. However, were the Bard alive, would he iterate, "It is a custom more honoured in the breach than the observance"? Let's hope not! :-)
ctgi