This morning, the Nasdaq OMX Group (NASDAQ:NDAQ) announced a $40 million plan to compensate investors who lost out in its disastrous handling of the Facebook Inc (NASDAQ:FB) IPO. The package was announced earlier today, and has not been well received by people both inside the trading world and commentators in general.

The deal would see most of the money, $27 million, go to larger investors who were hit by the IPO in the form of reduced transaction fees. That sum has been the subject of most of the discussion this morning. There has been speculation that the deal is illegal and will not be allowed past the regulators.

The Wall Street Journal reported earlier on a number of people involved in the investing and index world that were unhappy with the plans brought forward by the exchange. Some agreed that the deal was illegal, while others said they would vehemently object to the plan.

The most potent of the comments reported in that article was from Direct Edge Holdings CEO William O’ Brien who said it was “a shameless attempt to turn a big investor confidence eroding event into a competitive advantage.” That seems to strike at the heart of the deal.

The Nasdaq is attempting to keep the big investors happy by offering them concessions as it hopes to recover from a massive loss of confidence instigated by its poor handling of the Facebook IPO. Because of its manner, the deal may very well be rejected on review.

If the firm cannot manage to get this particular offer done it will suffer for much longer as the compensation process becomes more and more drawn out. If the process goes on for a large amount of time investors are likely to see that as a mark of incompetence as well. That’s something the group can ill afford at this point.

The Nasdaq will be under this cloud for some time. That is inevitable after the scale of the IPO they manged to bungle. It is up to the exchange to fix its own reputation and this is clearly not the way to go about it.

Nobody will emerge from reading this morning’s deal satisfied. It directly compensates the investment firms leaving them to compensate their clients. It is also only a patch on the $100 million that investors say they are owed on the deal.

The Nasdaq had a chance to begin a resurrection of its operations. The exchange has begun reviewing its computer equipment for bugs and making other moves that, though small, are the beginning of a demonstration that there is nothing wrong with the processes in the company and it is able for future IPOs.

This compensation package was a more public way to show that it was fixing the errors it had made. Instead the company introduced a package that is complicated for the investment banks to deal with, that is underwhelming in size and may not even make it past the regulator.

For a firm attempting to remake its image Nasdaq OMX is going about it in a strange way.