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CBA - Behind the Scenes of NBA Trades

With the offseason quickly approaching, the NBA community is talking more and more about potential trade speculations and rumors. And considering many people believe the 2021 Free Agency Market is relatively weak, many also think that this offseason will see numerous blockbuster trade deals. However, there is much more going on behind the scenes than what meets the eye.

First of all, there is a designated period during which teams can make trades. Teams can make trades anytime between the start of the regular season and the NBA Trade Deadline. For the 2020-21 season, this period was between October 22, 2019, and the Trade Deadline on March 25, 2021. This gives teams roughly five months during the season when they are free to exercise trades. The Trade Deadline exists to maintain continuity during the homestretch of the regular season and the playoffs. It also forces teams to build their roster to its desired make-up before the playoff push. There is a second period during which teams can also make trades during the offseason. Essentially teams are free to start making trades when their season ends. This can range anywhere from the last day of the regular season to the last day of the NBA Finals if a team makes it that far. However, during the offseason, there is a quiet period when no trades can be made between 6 pm on June 30 and noon on July 6. This period is called a Moratorium and exists so that free agents have time to negotiate with several teams prior to decision time. Additionally, teams can not trade during this time.

In order to complete a successful trade, teams must also make financial considerations. This usually means looking at your team’s Total Guaranteed Salary and comparing it to the Salary Cap for that year. When a trade happens, there is also a transfer of guaranteed salary. Let’s say Team A is trading assets valued at $10 million to Team B. In return Team B is trading assets worth $10.1 million to Team A. Generally, during a trade, teams cannot go more than $100,000 above the salary cap. So in this scenario, the trade would be financially viable because even though Team A is taking on an additional $100,000 in guaranteed salary, it is close enough to match contracts that it would be acceptable. While salaries in a trade do not have to match exactly, it is a narrow window that makes finding a trade partner more complex.

There is a way that teams can push trades through despite massive salary differences. This is called a Traded Player Exception, or TPE. A TPE is created when a team sends a player away in a trade without receiving the same salary back. Instead, they receive a TPE. Returning to our scenario, let’s now say Team B receives the $10 million in assets from Team A but only sends back $5 million in return. This would create a TPE for Team A worth $5 million. Over the next year, Team A can use the TPE to take on additional salary over the salary cap. So if without the TPE, Team A was $2 million away from the salary cap, with the additional $5 million from the TPE they could then take on a player or players totaling up to $7 million. You might ask why a team would trade a player away without getting any players in return, but a TPE could prove more valuable than a player in many situations.

Additionally, teams participating in a trade must complete a call with the league office before the trade going through. They must disclose all the details of the deal and any relevant information about the players involved on this call. This is important because if any crucial information, like an injury, is not disclosed, the trade can be vetoed by the league, and teams can be penalized financially and through draft picks.

Several other intricate details can go into trades in the NBA. Any player who has played for 8+ years with 4+ years with one team can agree to a No-Trade Clause with said team. This means the player cannot be dealt in a trade over the length of their contract unless the player decides to waive the clause. Teams can also use cash to provide value in trade offers. The amount of money a team can use throughout a season in this type of cash transfer changes with the salary cap, but in the 2019-20 season, it was $5.617 million.

As you look at the upcoming offseason, you may see many stars mentioned in trade rumors. Already names like Damian Lillard, Kemba Walker, and Kristaps Porzingis have been circulating. We will likely see some high-profile trades, but now that you understand some of the complexity behind a successful NBA trade, do not be shocked if your team can not land the superstar you were hoping for.

Until next time…

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