If that's truly how people use it, it is very strange. In actual roman numerals MM = 2000. Using 'M' as a roman numeral but then multiplying digits makes no sense at all (you'd need numerals for all the prime numbers to represent arbitrary numbers...).

And in SI, the prefix 'M' (mega) already means 1 million, so to me it seems MM is the notation that maximizes confusion.

I totally agree - there's not a roman numeral justifaction for it at all and it's very confusing in normal situations. My understanding is that it comes from financial (specifically trader) jargon and I suspect it probably originated to differentiate it from some other use of "m", but don't know for sure... Maybe someone else knows why it arose?