FINRA Official Regulatory Report: FAQs Regarding Trading in MMTLP

Initial FAQ Release

March 16, 2023

Supplemental FAQ

November 06, 2023

Blue Sheet Short Count

2,651,691 Shares

Q1: Why did FINRA halt trading in MMTLP on December 9, 2022?

FINRA halted trading in MMTLP under FINRA Rule 6440(a)(3) as an extraordinary event halt. Under the corporate action schedule announced by Meta Materials Inc., the Series A Preferred shares were to be canceled and exchanged for shares of Next Bridge Hydrocarbons, Inc., an unlisted private company.

Because standard equity settlement in the United States requires two business days (T+2 under SEC Rule 15c6-1), trades executed on Friday, December 9 would not settle until Tuesday, December 13—after the corporate record date of December 12, 2022. Consequently, purchasers on December 9 would have no legal entitlement to receive the Next Bridge shares, and sellers would have no ability to deliver private unlisted stock. FINRA acted to prevent widespread settlement failures and clearing gridlock.

Q2: Did FINRA halt trading to protect institutional short sellers from a squeeze?

No. FINRA's regulatory mandate is to maintain orderly markets and ensure that trades executed on public quotation venues can clear and settle in accordance with federal law. FINRA does not intervene to protect short sellers or prevent short squeezes.

          The Legal Reality of Short Obligations: Under standard securities lending agreements and corporate spin-off rules, short positions do not automatically terminate when a security is canceled for private stock. Instead, the short liability carried over as an unlisted private debt between the borrowing broker and the lending customer.
        

Q3: What was the actual aggregate short interest in MMTLP as of the halt?

In response to widespread claims on social media of hundreds of millions of “naked” or counterfeit short positions, FINRA collected and analyzed Electronic Blue Sheet (EBS) data from all clearing firms and broker-dealers holding positions in MMTLP.

As published in FINRA's Supplemental FAQ on November 6, 2023, the total aggregate short position in MMTLP as of December 12, 2022 was approximately 2.65 million shares (~2,651,691 shares), representing approximately 1.6% of the 165,523,363 total outstanding Series A Preferred shares.

Q4: Was a Form 211 ever filed with FINRA to initiate quotation of MMTLP?

No. In regulatory responses and Congressional inquiries, FINRA confirmed that it did not process or approve a Form 211 application under FINRA Rule 6432 for MMTLP.

Instead, broker-dealers quoted and executed trades in MMTLP pursuant to the unsolicited customer order exception under SEC Rule 15c2-11(f)(2). Ticker symbol MMTLP was assigned by FINRA Market Operations strictly as an administrative symbol to allow trades to be processed and reported for price transparency to the OTC Reporting Facility (ORF).