In The NBA, Even The Most Minor Trades Can Be Very Complicated

In the rare training camp trade, the Oklahoma City Thunder and Houston Rockets agreed to a deal involving eight players, one draft pick, and a whole bunch of intricacies.

On the surface, the trade is relatively simple. The Thunder have acquired Sterling Brown, Trey Burke, Marquese Chriss and David Nwaba from the Rockets in exchange for Derrick Favors, Maurice Harkless, Ty Jerome, Théo Maledon, a 2026 second-round pick and cash – eight players in the deal is certainly above average, but with only two parties in the deal, the required math could certainly be harder. It is a lot of players, but only two directions. You can get your head around that one.

However, understanding the arcana of the deal which gives it both intrigue and purpose relies upon some Collective Bargaining Agreement rules that are confusing and not often fully understood. The deal is complicated in its operation and requires a precise breakdown to understand how it works. In the NBA, even the most minor trades can be so very complicated.

The complications come from both the specific circumstances of one of the players involved, and the wider eternal confusion regarding trade math. The following attempts to break down them both.

Of the four players Houston sent out, three (Burke, Brown, Chriss) were acquired by the team on draft night from the Dallas Mavericks in the trade that also saw them acquire Boban Marjanovic and a first-round pick (later used on Wendell Moore ) in exchange for Christian Wood. The three had never played for the Rockets, and probably never would have done; they were acquired as salary filler, with the pick being the purpose.

Irrespective of their importance to that previous deal, the date of their acquisition by Houston (24th June) is the important thing here. The fourth player they sent out, Nwaba, had been with the team for more than two years since signing as a free agent; in all four cases, then, the players traded to Oklahoma City had been with Houston for at least two months, an important distinction for reasons that will be explored below.

This same situation was not the case for the Oklahoma City Four. It was for three of them – Favors, Jerome and Maledon were all with the team for the entirety of last season. But Harkless was acquired only this week, the returning player piece from their trade with the Atlanta Hawks that saw them take on a 2029 second-round pick and adjust the protections on a different already-outstanding one in exchange for fringe prospect Vit Krejci.

The Hawks had salary-dumped Harkless to save on luxury tax, and the Thunder got paid in picks to help them with that. Harkless was a necessary financial filler who would never have played for either team. His inclusion in the second deal, though, could be seen as contradictory to those with a passing knowledge of the NBA’s trade rules.

A fairly well-known rule states that players acquired by trade cannot be traded again for two months after their initial acquisition unless traded on their own, which, on the first pass, Harkless was not here. Having been acquired in the aforementioned Krejci trade earlier in the week, it would follow that Harkless could not be traded again alongside the other trio in this way.

This rule, however, is often misunderstood. Specifically, it actually states that players cannot be traded within two months of acquisition if their salary is being aggregated with that of another or others. It is a common misconception that players privy to this rule cannot be dealt in multi-player trades – in fact, they can, as long as the trade is structured as separate, parallel trades in which the relevant player’s salary is not aggregated.

[The above rule also only applies to players who were acquired in the previous deal via an exception, rather than through cap room. Harkless however was acquired through an exception; specifically, he was acquired into the Disabled Player Exception granted for the season-ending injury to rookie Chet Holmgren.]

Because they have all been with their respective teams for longer than two months, as above, this issue of aggregation does not apply to seven of the eight players in the deal. To Harkless, it does. Yet because of the Thunder’s manner of structuring the deal, as will be broken down below, Harkless’s salary was not being used in aggregation with any of the others, and thus he was able to be sent out in the trade despite the presence of the other three players.

That same difference between the overall trade and each individual team’s structuring of their side of it from their point of view is also key to understanding the math behind the deal, the exceptions created by it, and, following on from there, the purpose of doing it.

In the aggregate, it is widely understood that the outgoing and incoming salaries in a trade must be close enough to counterbalance each other. For teams operating over the salary cap – which is almost always almost every team – the only way to facilitate player trades is to meet the salary matching rules set out by the Traded Player Exception (which, while colloquially and confusingly used in the discourse to refer to the instrument generated by non-simultaneous trades, is both here and in the CBA’s language itself used to refer simply to the exception that grants teams over the salary cap the ability to make trades at all).

Over the course of various Collective Bargaining Agreements, those rules have been slightly loosened up. Currently, the parameters of what a trade’s math must look like varies, depending on how much they are sending out, and whether or not they are a luxury tax payer.

Neither the Thunder nor the Rockets are or will be taxpayers, and neither is under the salary cap. The combined salaries of Favors/Harkless/Jerome/Maledon equal $20,838,867; the combined salaries of Brown/Chriss/Burke/Nwada equal $13,515,920.

Giving out the larger amount and taking back less, the math of the overall trade was no problem for Oklahoma City. For the Rockets, as they were taking on more, they needed to fit the deal within the upper limit, which, having been between $0 and $6,533,333 above the $123,655,000 salary cap threshold at the time of the trade, meant they could take back a maximum of 175% plus $100,000 of whatever they were sending out. 175% plus $100,000 of $13,515,920 equals $23,752,860; the $20,838,867 amount they actually took back, then, fits in comfortably.

So, that’s it for the math of the overall trade. But let us circle back to the idea introduced earlier; that of each team party to a trade being able to structure the math for their side of it however they want. How does that work, what is the benefit of that, and what specifically happened in this instance?

As above, each team is able to structure the trade in the way which suits them best, even if said structure is different to how other parties do it. There can be multiple ways to conduct the same trade, and this is evident and important in the creation and usage of Traded Player Exceptions (here used to refer to the creation of cap assets to be used in future trades, and not the other thing that phrasing can be used for; this detail is inserted here deliberately to make it extra confusing, entirely at odds with the rest of the post, which tries to make confusing things digestible. Sorry.)

This confusing process is best illustrated by way of example. Suppose Team A has an $8 million Player X, a $5 million TPE and a $3 million TPE, while Team B has (very conveniently) a $5 million Player Y and a $3 million Player Z. Suppose Players Y and Z from Team B are traded for the $8 million Player X from Team A alone.

From Team B’s perspective, the deal is simply Players Y and Z and their $8 million aggregate salary in exchange for Player X from Team A. However, Team A can structure the deal so that Player Y is absorbed by the $5 million TPE and Player Z by the $3 million TPE, thereby allowing them to send out Player X for no incoming salary, thereby creating a fresh $8 million TPE for Player X.

It is perfectly permissible to structure the trade in this way, despite it being different to the structure used by the other party, as long as the structure for each party satisfies the CBA and the overall trade math works. And the rule whereby all parties to a trade must give up something in the deal is satisfied by the fact that player X is traded.

Essentially, this hypothetical trade is both one big deal and three parallel smaller ones, all completed at the same time. The need to trade something for something is satisfied in the overall deal, and thus does not need to be satisfied in each parallel smaller one.

Confusing though it may be, this use of structure is vital in trade machinations, including this one. From the Thunder’s point of view, this deal has been structured as follows:

• 1) Harkless for Brown/Nwaba. Harkless’s $4,564,980 is enough to salary match the combined $8,022,000 of Brown and Nwaba via the aforementioned 175% plus $100,000 maximum amount they can take back, albeit only just (the maximum amount being $8,088,715). Note also that Harkless is being traded here alone, which is why the aforementioned potential issue of him being traded twice in three days does not apply. In OKC’s side of the trade math, he is not being aggregated.
• 2) Maledon for Burke. Maledon’s $1,900,000 matches with Burke’s even $3 million salary, again via the 175% plus $100,000 salary matching maximum rule.
• 3) Chriss is incorporated via the Minimum Salary Exception. The Minimum Salary Exception to the salary cap is not just usable for signing players to one- or two-year minimum salary contracts; it can also be used for acquiring such players via trade, too. Therefore, no other exception nor salary matching is required to take on Chris’s salary.
• 4) Favors for nothing. There is nothing left to trade. Favors therefore has a $10,183,800 outbound salary, with nothing coming in to offset it, thereby creating a TPE for the Thunder for that amount.
• 5) Jerome for nothing. As above, for $4,220,057.

In total, in a trade in which they gave up a future second-round pick and cash to move off of $7 million in 2022/23 payroll, the Thunder were also able to structure the deal in such a way that they generated two potentially useful TPEs out of it. It costs them those assets and the aforementioned Holmgren DPE to do it, but TPEs are more useful than DPEs, as they can be used to acquire longer-term contracts, as well as incorporate multiple players.

From Houston’s point of view, without having incumbent exceptions to absorb the incoming salaries, and with none of the returning Thunder players earning the minimum salary to be able to do the Chriss-like trick, their trade math relies upon salary-matching everybody for everybody , and thus no TPEs were created. Nevertheless, both sides’ structures, no matter how different they are, satisfy the CBA. The overall deal sees both teams trade something in accordance with the “no something for nothing” rule, and at no point is Harkless’s salary aggregated with another, thereby making his inclusion permissible.

It is not an easy concept to understand sometimes, or indeed ever, but it is more commonplace than you might think, and can be integral to understanding what happens in the NBA and why. Although I could understand an argument that it is perhaps better not to know.