The NBA’s ‘Walking Trade Exception’ Explained


The NBA has a soft cap system that combines
a salary cap with exceptions that allow teams to exceed it, such as minimum contracts and
the midlevel exception. Bird rights, an exception that allows teams to exceed the salary cap
to re-sign their own free agents, are the strongest tool because they give a team significant
spending power that is often separate from a player’s cap hold. As such, there are
times when a team just has to keep a small cap hold on the books and then can go way
over using Bird rights. These different CBA elements combine to create
a powerful tool that can be referred to as “the walking trade exception.” What happens
is a team uses up its cap space on additions, but retains the hold for a player with Full
or Early Bird rights, with Full Bird being preferred because that player can get paid
anywhere up to his maximum. At that point, the general manager can sign
the Bird rights free agent to a lucrative two-year contract with nothing guaranteed
for the second season. Two years, because players who sign one-year deals with their
prior team using Bird rights can veto trades, which defeats the purpose of a walking trade
exception. Since there is a massive $23.5 million in
wiggle room between the salary cap and luxury tax this year, teams can spend a lot on these
players without getting into really thorny territory.
Ideally, these contracts are mutually beneficial. First, the player makes more money than he
would have otherwise as a free agent because, after all, he has the ability to sign elsewhere
if this structure and payout is not what he wants. Furthermore, a walking trade exception
contract typically leads to the player hitting the open market just one year later because
the idea is based around an inflated first season so Year 2 is likely more than he is
worth and non-guaranteed. These deals also rely on small cap holds, meaning the player
had a low salary for at least the most recent season and likely before that as well, so
the contract can be a huge payout for them. What the team gets out of it is far more interesting.
Basically, this exception allows a front office to improve their team in-season by creating
an avenue to add higher-salaried players. The term “walking trade exception” works
because it is the most basic way to think about what a general manager can do with the
contract, but it is actually far more versatile. Traditional trade exceptions are very useful
in their own right since they are a way to take on a contract at up to the value of the
exception, plus $100,000, without sending back salary, which may be enough to get a
specific deal done. However, since the walking trade exception is an actual rostered player
rather than just a CBA tool, a GM can think much bigger, including using it in conjunction
with other contracts to acquire a far larger salary.
The difference can be important even in more simple trades because the trade rules are
more flexible on player-for-player transactions than trade exceptions.
Let’s use the example of Darius Miller since he re-signed with the Pelicans using Bird
rights on a deal that fits this structure perfectly. Miller will make $7.25 million
this season, so even without anything else included, David Griffin and the Pelicans could
trade Miller for someone making as much as $12.25 million at or around the deadline instead
of $7.35 million in a “normal” trade exception. Plus, Griffin could add draft picks or some
of the Pelicans’ young talent to create a much bigger deal for a higher-salaried player
who would not have been acquirable without Miller’s inclusion. By comparison, general
managers cannot combine traditional trade exceptions with other salaries or exceptions
to acquire an even larger salary. Miller appears to be the highest-profile walking
trade exception this offseason and a few front offices may regret not following suit.
As the league adjusts to the new salary cap reality three years after the cap spike and
a few stagnant summers, expect to see tricks like the walking trade exception rise in both
use and value.

13 comments

  1. Fun Fact. The infamous Pierce – KG trade would not have been possible without a player signed to be a Walking Trade exception. Keith Bogans was signed by the Nets for $5 million, way more than he would have gotten in the open market, just to be traded to the Celtics. Without that, the salaries wouldn't match.

  2. seriously, I want to throw up from hearing the in and outro. We get it, this channel exists because of the Athletic

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