How Could Pacers Use Trade Exception?

Thursday, July 13, 2006
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Conrad Brunner

Q. Can you explain how the Pacers' acquired a $7.5 million exception from the Hornets in the sign-and-trade deal with the Hornets and what are its ramifications to the Pacers' ability to sign free agents this year or in the future? Also, is it foregone conclusion that (Andrew) Betts will never be in blue and gold? (From Tim in Indianapolis)

A. A traded player exception is basically a one-year credit line a team receives when it trades away a player (or players) whose contract far exceeds those received in return. In this case, because the Pacers gave up Stojakovic, who signed a deal reportedly worth nearly $13 million per over five seasons, and received the draft rights to 1998 second-round pick Andrew Betts, the trade exception was necessary to balance the deal for salary-cap purposes.

The Pacers have up to one year to use the exception, but it can not be used to sign free agents. It can only be used to acquire existing contracts from other teams; on other words, to consummate a trade. The Pacers, in theory, could now trade away a player making $3 million in return for a player making up to $10.6 million (there's a $100,000 allowance on top of the $7.5 million). A traded player exception can also be used in parts, rather than as one whole amount. This therefore gives them enormous flexibility on the trade market.

As for Betts, the 7-footer from England appears to be headed the way of Joe Kleine, which is to say his only link to the Pacers will be as the answer to a trivia question. Kleine, you'll recall, was the player thrown into the deal that brought Jermaine O'Neal to the Pacers from Portland for Dale Davis in 2000. Though Kleine's contract was still active, he was no longer playing and had already begun his career as a broadcaster. Betts, a 7-footer considered one of England's brightest basketball talents, has spent his professional career in Europe and it appears likely that is where he will remain.

CORRECTION (Posted in the QOD of July 14): Thanks to reader Bobby of Eugene, Ore., for double-checking my facts with Larry Coon, author of the comprehensive online Salary Cap FAQ.

I wrote that the exception was necessary to balance the deal for cap purposes. As Coon pointed out, "There's no necessity. Teams can trade salary for $0 and be done with it. What really happens is that in individual player trades, teams have the choice of acquiring up to 125 percent plus $100,000 right away (a simultaneous trade), or 100 percent plus $100,000 any time in the next year (a non-simultaneous trade). A trade exception is simply the amount they have available to complete a previous, non-simultaneous trade."

I also suggested the Pacers could aggregate the trade exception in a deal, theorizing they could trade a $3 million player for a $10.6 million player. Coon corrects me thusly: "They can't add the trade exception to a $3 million player like that. Any player(s) they acquire must fit entirely within the $7.6 million exception."