2023 Trade Deadline Countdown: Which teams will be third-party money brokers?
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With less than two months remaining until the NHL’s March 3 trade deadline, we’re bringing you one deadline-focused story each day at Daily Faceoff.
Today we’re going to focus on the salary cap picture and how in a season with so little space to go around, a select group of teams can weaponize their remaining money to harvest assets and help opponents process trades.
You could call this deadline the Year of the Third-Party Broker.
2023 Trade Deadline Countdown: 56 Days
Let’s start with a little background.
History of Third-Party Brokers
The NHL and NHL Players’ Association began allowing teams to retain salary in transactions starting in 2013. But it took until 2018 for NHL teams to get creative enough to push this allowance a step further, involving a third team to temporarily trade a player to that franchise so that the third team could also retain a portion of his salary, before sending him to his final destination.
The Vegas Golden Knights were the first team to do it, helping Ottawa broker Derick Brassard to Pittsburgh.
The third team involved in the trade parks a portion of that player’s salary on their salary cap for the remainder of the season. The player actually receives a portion of his salary in his paycheck from that team. In exchange for their services, the “third-party broker” receives an asset, historically a mid-round draft pick.
NHL teams can retain a maximum of 50 percent of a player’s salary in a transaction. However, the third-party broker can also retain a maximum of 50 percent. So in essence, the acquiring team – usually a contender who is tight to the salary cap limit – can receive the player at just 25 percent of his originally stated AAV.
In the NHL, cap space is “use or lose,” so unless ownership has set internal budget limitations, there is little reason to not use every dollar available to bring back a draft pick. It is essentially “buying” a draft pick with real cash. Might as well use it, you can’t take your remaining space with you to next season.
Why Third-Party Brokers are Critical this Trade Deadline
You could call 2023 the Year of the Third-Party Broker because this is the third (and likely) final year that the NHL is operating in a flat salary cap environment as a result of the pandemic.
Salary cap space has never been more critical. According to CapFriendly, 19 of the league’s 32 teams are operating within $2 million of the limit. Some 17 of them are operating in LTIR, which means they technically have no cap space and have not been accruing space on a daily basis all season.
On top of that, big name and big money players are expected to be on the move this season. To date, the highest full AAV of a player ever involved in a third-party deal was Nick Foligno’s $5.5 million. There are eight-figure AAV’s on the trade block in Patrick Kane and Jonathan Toews. They are two of only 14 players in the league with AAV’s $10 million or higher – and only one of them (Jack Eichel) has ever been traded. The Sabres did not retain any of Eichel’s salary, so this would be a first, but as rental players, it is not only probable but prudent for Chicago to retain half on their way out.
What would it look like? Here’s a real world, hypothetical example:
Chicago trades Jonathan Toews to Colorado with the help of Anaheim.
Toews’ cap hit is $10.5 million.
> Chicago retains 50 percent: $5.25 million
> Anaheim retains 50 percent: $2.625 million
> Toews arrives in Colorado with $2.625 million salary cap hit.
Keep in mind, those dollar amounts listed are for cap purposes, and not actual dollars. There are 185 days in this season and on March 3, there will only be 41 remaining, so 78 percent of that original $10.5 million has already been paid in real cash and the retaining and acquiring teams will only be paying percentages on what is remaining.
That is one reason why some teams like to wait as close to the deadline as possible to acquire a player. If they have cap space, they accrue more each day, and each day the player is paid on another team’s cap and by that team, he costs less in real and cap dollars.
What can a Third-Party Broker get in return?
According to CapFriendly, there have been six trades brokered by third parties. The third team has received anywhere from a fourth to sixth-round pick, depending on how much money was retained.
Here is the breakdown:
March 21, 2022: Max Domi from Columbus to Carolina (through Florida)
Third-party broker: Panthers
Pick received: 2022 6th Round Pick
Salary cap space retained: $1.325 million
Real cash cost: $265,000
April 12, 2021: Mattias Janmark from Chicago to Vegas (through San Jose)
Third-party broker: Sharks
Pick received: 2022 5th Round Pick
Salary cap space retained: $562,500
Real cash cost: $130,297
April 11, 2021: Nick Foligno from Columbus to Toronto (through San Jose)
Third-party broker: Sharks
Pick received: 2021 4th Round Pick
Salary cap space retained: $1.375 million
Real cash cost: $320,043
April 10, 2021: David Savard from Columbus to Tampa Bay (through Detroit)
Third-party broker: Red Wings
Pick received: 2021 4th Round Pick
Salary cap space retained: $1.0625 million
Real cash cost: $265,625
Feb. 24, 2020: Robin Lehner from Chicago to Vegas (through Toronto)
Third-party broker: Maple Leafs
Pick received: 2020 5th Round Pick
Salary cap space retained: $1.1 million
Real cash cost: $242,473
Feb. 23, 2018: Derick Brassard from Ottawa to Pittsburgh (through Vegas)
Third-party broker: Golden Knights
Pick received: 2018 4th Round Pick
Salary cap space retained: $2 million
Real cash cost: $462,366
Armed with this data, we can tell you that historically, the real cash cost to buy a draft pick by acting as a third-party broker is somewhere in the neighborhood of:
4th Round Pick: $350,000
5th Round Pick: $185,000
6th Round Pick: $125,000
Given that the Carolina Hurricanes paid $833,333 in real cash dollars to take on Patrick Marleau’s contract in 2019, which brought them the 2020 No. 13 overall pick (Seth Jarvis), we can attempt to estimate the value of these picks in real cash cost:
1st Round Pick: $800,000+
2nd Round Pick: $650,000
3rd Round Pick: $500,000
4th Round Pick: $350,000
5th Round Pick: $185,000
6th Round Pick $125,000
7th Round Pick: $100,000<
Interestingly enough, even though we haven’t seen third-party deals brokered with cap hits in the magnitude of Kane and Toews, they won’t be the most expensive players to retain this deadline on a real cash basis. They are both earning only $2.9 million in real cash salary this season, which translates out to about $160,000 in real cash to retain, netting somewhere between a 5th and 6th round pick for whichever third-party team gets involved.
That distinction will belong to San Jose’s Timo Meier, if he ends up moving. Because he has a final year salary of $10 million, causing that expensive $10 million qualifying offer, a third-party team would have to pay approximately $554,000 in real cash to retain the maximum they can.
That means a third-party team would be most interested in getting involved with Meier if the buying team is willing to shell out something between a 2nd and 3rd-round pick. Cha-ching!
Which teams will be in the Third-Party Broker game?
Let’s rank them in order of perceived interest and ability:
1. Arizona Coyotes
Projected Cap Space: $34 million
We know the ‘Yotes are eager to acquire as many draft picks as possible. If they trade Jakob Chychrun, they might be flirting with the salary cap floor, so getting involved in the retention game makes sense, plus they can take on bad contracts.
2. Chicago Blackhawks
Projected Cap Space: $9.5 million
Take the above number with a grain of salt, because it will grow once they begin shipping off players, whether it’s Toews, Kane, Max Domi, Andreas Athanasiou or others. The Blackhawks have let it be known to everyone that they’re willing to act as a dumpster for bad contracts. They are ready to wield their cap space to the fullest extent possible.
3. Anaheim Ducks
Projected Cap Space: $26.5 million
This is a number that could also grow, although Anaheim won’t be in danger of the cap floor. GM Pat Verbeek took back John Moore’s contract in a trade last year with Boston and he’s also let teams know he can use his cap space to his team’s advantage to garner more picks.
4. Columbus Blue Jackets
Projected Cap Space: ~$7 million (LTIR)
The Blue Jackets are going to be a sneaky player in this space, because they have even more flexibility than that number would indicate: They could always move Jakub Voracek (not expected to play again this season) to LTIR to create $8 million more in space.
5. Buffalo Sabres
Projected Cap Space: $33 million
Why wouldn’t the Sabres get involved? No reason not to be in the game. They already have three second-round picks in the upcoming draft, it would be nice to cover off the third-rounder they lost in the Eichel deal.
6. Detroit Red Wings
Projected Cap Space: $9 million
Still a little bit too early to project where the Winged Wheel will be in the standings. They could leverage their space to be buyers to set themselves up for next season or help the playoff push. But GM Steve Yzerman has danced in this space before and has enough friends in the game to always be in the mix.
Watch out for…
The Florida Panthers if they end up selling off pieces. They don’t have a first-round draft pick until 2026 and as last season showed when they were involved with sending Max Domi to a potential Eastern Conference playoff foe, they could be the middle man in an attempt to recoup as many bullets as possible in the Draft.
Also, keep an eye on any team that has unexpected LTIR space, as they could accomplish the same thing. Florida was tight to the cap last season but in the days leading up to the deadline, Aaron Ekblad went down and would miss the remainder of the regular season, providing new found flexibility.