There is one basic rule of the NBA Salary Cap – a team cannot make a player transaction (player signing or trade) if they will be over the cap after the player is added to their roster. However, the current Collective Bargaining Agreement does include a number of exceptions to this rule, which allow teams that are over the cap to make changes in personnel.
Most of these exceptions (for example, the Larry Bird Exception) deal with signing free agents, but for teams over the cap that want to make trades, the Traded Player Exception is the primary tool that allows them to do so under the trade rules of the CBA. This exception is not necessary for any team that will have its team salary figure at or below the salary cap after making a trade, but if its team salary figure will be above the salary cap after a trade, then this exception can be used to allow the trade to happen. There are two ways that this exception can be used:
1) A team can make a simultaneous trade for one or more players whose total incoming salary is no more than 125% + $100,000 greater than the total of outgoing salaries of players leaving in the trade.
- Note that incoming and outgoing salary amounts might be affected by players who are considered to be Base Year Compensation players or Poison Pill Provision players.
- This application of the Traded Player Exception is only available when players are exchanged at the same time
2) A team can make a non-simultaneous trade for one or more players whose total incoming salary is no more than $100,000 greater than the outgoing salary of a single player leaving in the trade.
- Note again that incoming and outgoing salary amounts might be affected by players who are considered to be Base Year Compensation players or Poison Pill Provision players.
- The team has up to one year to bring in a player (or multiple players) using this provision of the Traded Player Exception.
- During this year period, the team is considered to have a ‘credit’ in the amount of the difference between outgoing and incoming salary until it is used to bring in other players in trade. This credit counts in the team salary figure, just as other exceptions such as the MLE or the BAE do, as long as it is unused. Sometimes confusingly, this credit is often referred to as a trade exception, although in actuality it is simply the second component of the Traded Player Exception.
- As mentioned above, the team can bring in player salary up to the amount of the credit plus $100,000.
- Two credits cannot be combined to create a larger credit.
In short, if, for example, a team sends out a player making $4 million in a trade, this exception allows them to bring back either $5.1 million (or less) in player salary immediately or to bring back $4.1 million (or less) in player salary during the next year.
Let’s look at some different ways that this exception has been used over the last year, to provide examples of how it operates:
- In February of 2011, Cleveland traded Mo Williams and Jamario Moon to the Clippers in a simultaneous trade for Baron Davis. The amount of incoming salary ($14.0 million) was greater than the amount of outgoing salary ($12.3 million), but was within the acceptable range of the 125%+$100,000 rule.
- In July of 2010, Cleveland traded LeBron James to Miami in exchange for draft picks, which carry a value of $0 for trade-matching purposes. Because Cleveland sent out $14.5 million in salary and received $0 back, they generated a credit (ie, ‘trade exception’) of $14.5 million. They have not used this credit in any trades to date.
- In July of 2010, Utah traded Carlos Boozer to Chicago in exchange for a draft pick. Because Utah sent out $14.4 million in salary and received $0 back, they generated a credit (ie, ‘trade exception’) of $14.4 million. Later that month, Utah used most of that credit to receive Al Jefferson and his $13.0 million salary from Minnesota, leaving them with a credit of $1.4 million that has yet to be used.
Please note that the two provisions of the Traded Player Exception cannot be combined. You cannot use the 125% rule for matching salaries today and get a credit (ie, ‘Trade Exception’) for the difference to use later.
Also note that if a player was signed using the Minimum Player Salary Exception for a minimum salary contract, he can be received by another team in trade using the Minimum Player Salary Exception. His new team does not have to used the Traded Player Exception to obtain such a player.