Tuesday, July 08, 2008

What On Earth Is A Trade Exception?

Among all of the questions that I field with request to the NBA and the salary cap, the one I struggle with most is about trade exceptions. Why is this significant?

Minnesota will sends its $2.8M trade exception from a 2007 deal of Mark Blount to the Miami Heat to Philadelphia for forwards Rodney Carney, Calvin Booth and a future 1st-round pick. According to Adrian Wojnarowski of Yahoo! Sports, this deal allows for the Sixers to offer a starting salary upwards of approximately$14M per season.
The Traded Player exception is the primary means used by teams over the cap for completing trades. It allows teams to make trades that leave them over the cap, but it places several restrictions on those trades. Trades using the Traded Player exception are classified into two categories: simultaneous and non-simultaneous. As its name suggests, a simultaneous trade takes place all at once. Teams can acquire up to 125% plus $100,000 of the salaries they are trading in a simultaneous trade. For example, a team trading a $5 million player in a simultaneous trade can receive one or more players whose salary is no more than 125% of $5 million, plus $100,000, or $6.35 million in return.

Non-simultaneous trade may take up to a year to complete.

While the term "Traded Player exception" refers to the entire exception which allows teams to make trades above the salary cap (including simultaneous trades, non-simultaneous trades, and base year compensation), it is also commonly used to refer to the one-year monetary credit teams receive while a non-simultaneous trade is pending completion. Be aware of this potential ambiguity, which was made worse by the current CBA (earlier CBAs used the term "Assigned Player exception" to refer to the entire exception).

If the salary cap is $50 million, a team has a team salary of $55 million, and they want to trade a $5 million player for a $4 million player, they still have to use an exception. Even though their team salary would be decreasing by $1 million, the fact that they would still be over the salary cap ($54 million) means that an exception is required.

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