S is for Sign-and-Trade

During recent seasons, several high profile NBA players have changed teams, not by simply being signed as free agents, but via Sign-and-Trade arrangements.  During the summer of 2010, for example, both LeBron James and Chris Bosh had the opportunity to sign with Miami as free agents, but each chose to accept a sign-and-trade with their previous teams instead.   This allowed them to receive the benefits of signing with their previous teams (using Larry Bird rights, which allowed for a higher % raise and a longer contract than would have been available if they had signed with Miami outright), while still allowing them to choose their destination.

Under the sign-and-trade rules of the Collective Bargaining Agreement, a team can re-sign their own free agent and then immediately trade him to another team.  So instead of the player leaving as a free agent with no compensation in return, a sign-and-trade allows for his previous team to be able to get something back (players, draft picks, cash, or some combination of the three).

There are some restrictions to a sign-and-trade agreement:

  • The player must be traded within 48 hours or else the contract is invalidated and the player once again becomes a free agent.
  • The player must have last played with the team sending him out in trade.  Trying to sign-and-trade another team’s free agent is not allowed.
  • The team signing him cannot use the Mid-Level Exception, the Bi-Annual Exception or a Disabled Player Exception to sign the player.
  • The player is under the same rules as any other player when it comes to Base Year Compensation status, which might create difficulties in putting together a workable trade if the player is receiving a sizable raise.
  • The new contract must be for at least 3 years, although only the first year must be guaranteed.  Guarantees on the remaining years are subject to negotiation.
  • A signing bonus written into a sign-and-trade contract can be paid by either of the teams involved.  However, the player’s previous team is limited to only being able to contribute $3 million maximum towards any signing bonus.
  • A trade bonus written into a sign-and-trade contract is not triggered by this trade.  It would only be triggered if the player is traded again during the term of the contract.
  • The terms of the contract (salary amount, contract length, etc.) are based on whatever cap space or exception is held by his previous team and is being used to sign him.
  • All other applicable trade rules apply
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