Hedge fund has huge unrealized loss that may bankrupt them if they try to buy the shares that they shorted back.
Their broker realizes too late, and if they margin call them now, the hedge fund might not have enough money to pay for the shorts. Thus, the broker will need to pay.
DTCC realizes this, and ups the collateral requirement so that the broker / clearing house has to insure someone will pay (whether it's the broker or hedge fund).
Because DTCC works with all the clearing houses and brokers, the risk from the hedge funds is suddenly everyone's problem to deal with together. By trying to deal with it, they close down trading for retail, and coincidentally aid the hedge funds short position.
Maybe the answer to this is DTCC needing to have collateral requirements per clearing house or broker where they think the risk is highest (the bankrupting hedge funds). Maybe it's regulation to not allow such high leverage or force margin calls faster so the losses can't be too big to fail. Hopefully something is done to fix it!