What is the Traded Player exception?
As described in question number 70, exceptions are the mechanisms that allow teams to function above the salary cap. Any trade which results in the team ending up over the salary cap requires an exception. This is true even if the team is moving downward in salary. For example, 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.
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.
A non-simultaneous trade may take up to a year to complete, but the team can only trade away one player, and can receive no more than $100,000 more than the salary they trade away. Non-simultaneous trades are described in question number 72.
In short:
•A simultaneous trade gives the team more money but less time
•A non-simultaneous trade gives the team more time but less money.
It is important to view a trade from each team's perspective separately, rather than as a single, unified transaction. This is because the same trade may be organized differently according to each team's needs. For example, a trade might be classified as a simultaneous trade from one team's perspective, but from the other team's perspective it's actually broken into two trades, one simultaneous and the other non-simultaneous (completing a trade they made months earlier).
There are several restrictions on trades (either simultaneous or non-simultaneous) which are described in other questions in this FAQ. These include Base Year Compensation (question numbers 76, 77 and 78), sign-and-trade (question numbers 79, 80, 81 and 82), including cash in trades (question number 83), trading draft picks (question number 74), trade bonuses (question numbers 86 and 87), and no-trade provisions (question number 88). In addition, performance incentives can complicate trades (question number 64).
Also be aware that 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).
72. What is a non-simultaneous trade?
In some cases, teams have up to one year to acquire the replacement player(s) to complete a trade. These trades are considered non-simultaneous trades. In a non-simultaneous trade, a team can only acquire up to 100% plus $100,000 of the salary it gives up (as opposed to 125% plus $100,000 in a simultaneous trade). A trade in which more than one player is traded away can only be simultaneous; non-simultaneous trades are allowed only when a single player is traded away (although teams can sometimes find ways to configure multi-player trades as multiple single-player trades which are non-simultaneous).
Here is an example of a non-simultaneous trade: a team trades away a $2 million player for a $1 million player. Sometime in the next year, they trade a draft pick (with zero trade value itself) for a $1.1 million player to complete the earlier trade. They ended up acquiring $2.1 million in salary for their $2 million player -- they just didn't do it all at once, or even necessarily with the same trading partner.
In the above example, after the initial trade of the $2 million player for the $1 million player, it was like the team had a "credit" for one year, with which they could acquire up to $1.1 million in salaries without having to send out salaries to match. This credit is often referred to as a Traded Player exception or a trade exception, but be aware that the CBA uses the name "Traded Player exception" to refer to the entire exception which allows teams to make trades above the salary cap (including simultaneous trades, non-simultaneous trades, and base year compensation).
There are some common misconceptions about non-simultaneous trades. For one, teams cannot use a Traded Player exception to sign free agents; it can be used only to acquire existing contracts from other teams. For another, teams cannot combine a Traded Player exception with other exceptions (such as the Mid-Level exception or the 125% plus $100,000 margin from another trade) in order to trade for a more expensive player. For example, a team with a $1 million Traded Player exception cannot combine it with their $2 million player to trade for a $3 million player (see question number 75 for more information on combining exceptions).
Here is a more complicated example of a legal non-simultaneous trade: a team has a $4 million Traded Player exception from an earlier trade, and a $10 million player it currently wants to trade. Another team has three players making $4 million, $5 million and $7 million, and the teams want to do a three-for-one trade with these players. This is legal -- the $5 million and $7 million players together make less than the 125% plus $100,000 allowed for the $10 million player ($12,600,000), and the $4 million player exactly fits within the $4 million Traded Player exception. So the $4 million player actually completes the previous trade, leaving the two teams trading a $10 million player for a $5 million and a $7 million player. From the other team's perspective it's all just one big simultaneous trade: their $4 million, $5 million and $7 million players for the $10 million player.
Again, non-simultaneous trades are not available when a team trades away multiple players (aggregates). Let's say a team has a $4 million player and a $5 million player, and uses the Traded Player exception to trade for an $8 million player. Even though they trade away more salary ($9 million) than they receive ($8 million), the fact that they aggregated the two players means they do not gain a Traded Player exception. However, it is sometimes possible to reorganize these trades so that players technically are not aggregated. A good example of this occurred in 2004 when Houston traded Steve Francis, Cuttino Mobley and Kelvin Cato to Orlando for Tracy McGrady, Juwan Howard, Tyronn Lue and Reece Gaines. As a single trade, it could only be simultaneous since multiple players were moving each way. However, Houston was able to reorganize the trade into three separate trades. In one trade, they acquired McGrady and Gaines for Mobley and Cato. In another trade, they acquired Howard and Lue using an existing Traded Player exception from their earlier Glen Rice trade. That left them trading Francis essentially by himself for nothing, which generated a new Traded Player exception in the amount of Francis' base year value. From Orlando's perspective, it was a single, simultaneous three-for-four trade.
Teams can consume only part of a Traded Player exception, in which case they can still use the remainder in a future trade. For example, if a team trades a $4 million player for a $2 million player, they gain a $2.1 million Traded Player exception. If they later trade a draft pick for a $1 million player, they still have $1.1 million remaining to acquire more players and complete the trade (until one year from the date of the original trade).
Also see question number 20 for more information on the availability and use of this exception
