Updated: Dec 12, 2019
Major League Soccer is complicated. According to Nashville SC General Manager Mike Jacobs, it's "probably the most complicated league for player acquisition in the world." Nashville are at ground zero, building their roster from the ground up. So far, they've signed nine players to their squad, with more to be announced in the coming weeks.
Below is a description of the current system and regulations for rosters and acquisitions. It's important to note that some of this will likely change with negotiations for a new Collective Bargaining Agreement set for this winter.
MLS is designed for parity. Each club has to operate under a salary cap ($4,240,000 in 2019). However, it's not a completely straightforward cap. While players are supposed to each have salaries under $530,000/year (the maximum budget charge), clubs have a couple of options to get around that. More on that below.
MLS uses the term "budget charge", which is synonymous with "salary cap".
An MLS club's active roster can have up to 30 players. All 30 players are eligible to be selected for an 18-player matchday squad during the season. Within that 30 man roster, there are several categories that affect the budget charge.
Roster spots 1-20 count against the budget charge. Clubs aren't required to fill all 20 spots, and these players count as a maximum of $530,000 towards the salary cap.
Roster spots 21-30 do not count against the budget charge, and fall into two categories. The Supplemental Reserve Roster (spots 21-24) is comprised of either players at the senior minimum salary ($70,250), generation adidas players, or Homegrown Players earning more than the senior minimum salary. The Reserve Roster (spots 25-28) is comprised of players earning the reserve minimum ($56,250) or Homegrown players earning more than the reserve minimum. Players on the reserve roster must be under 24 (age is determined by year of birth). In addition, roster spots 29-30 can only be filled by Homegrown players.
Clubs have the option of signing up to three Designated Players, players whose salary and transfer fees are above the budget charge, but only count as the max budget charge to the budget charge of $530k. Each club gets two of these DP slots, and can obtain a third by paying $150,000 to the league office. Hany Mukhtar is the first DP Nashville SC has signed.
Clubs have the option to sign a Young Designated Player as their third DP. If a club uses a Young DP tag to sign a player, they're not required to pay $150,000 to the league and can still have two other DPs on their roster. Young DPs are required to be 23 years old or younger. Randall Leal currently occupies a Young DP slot for Nashville.
Allocation money was started in 2015 as part of a push by the league to bring in higher quality players while still maintaining the parity of the salary cap. This money is available to clubs in addition to the salary budget of $4,240,000.
GENERAL ALLOCATION MONEY
Each club received $200,000 in General Allocation Money (GAM) from the league at the start of the year, and could receive additional GAM by meeting certain criteria (missing the playoffs, selling a player to a non-MLS club, qualifying for the CONCACAF Champions League, etc).
GAM can be used to buy down a player's contract so that it falls under the maximum budget charge. This allows clubs to bring in players over the cap who don't occupy a DP slot. It can also be used to buy down a DP contract to free up a DP slot while reducing the cap hit to the maximum budget charge. GAM can also be used to offset loan and transfer fees.
Clubs can trade GAM within MLS.
TARGETED ALLOCATION MONEY
Each club received $1.2 million in Targeted Allocation Money (TAM) at the start of the 2019 league year, and had the option to spend up to $2.8 million of their own money as "Discretionary TAM" (i.e., money spent by the club that did not count towards the salary cap). If clubs don't spend their non-discretionary TAM, it rolls over into next year's budget.
TAM can be used to buy new players over the maximum salary budget charge, including salary, transfer and/or loan fees. Clubs can use TAM to re-sign a current player at a salary more than the maximum charge. Clubs can use TAM to sign Homegrown players to their first MLS contract. Clubs can also use TAM to buy down a DP's contract to bring it under the maximum charge, but when that happens, they have to simultaneously bring in a new DP at an equal or greater investment level than the player they buy down.
Clubs can trade TAM within MLS, and it expires after four full transfer windows.
INTERNATIONAL ROSTER SPOTS
Each club starts out with eight international roster spots. These are tradable within the league, and there's no limit to how many international spots a club can have. Once traded, the roster spot is good for a full season.
To qualify as a domestic player, a player has to be a US Citizen (or Canadian citizen for the three Canadian clubs), a permanent resident (Green Card holder), or qualify for another special status (refugee or asylum status). Homegrown players also qualify as domestic players.
HOMEGROWN INTERNATIONAL RULE
The Homegrown International Rule lets players who come through a club's academy to count as a domestic players for roster purposes. To meet the Homegrown International requirements, players must
Be a member of the MLS club's academy (or Canadian approved youth club) in the year before he turns 16
Sign their first professional contract with the MLS club or their USL Affiliate
Homegrown players are able to be signed directly from the academy if they've been in the academy for a year prior, thus avoiding going through the SuperDraft. There's no limit to how many Homegrown Players a club can have on their roster, and they're eligible to earn up to $125,000 while still retaining their Homegrown tag.
Clubs can trade homegrown rights with the player - for instance, Nashville acquired Derrick Jones and his Homegrown rights from Philadelphia. Another major bonus of signing Homegrown players comes in the transfer market. Typically, MLS keeps 75% of all outgoing transfers, but clubs selling a homegrown player get to keep 100% of the transfer fee, and can turn $750,000 of that fee into GAM. So when Atlanta United sold Miguel Almirón to Newcastle for $27M, they only kept $20.25M, with the rest going to the league. But when Vancouver sold Alphonso Davies to Bayern Munich, the Whitecaps kept 100% of the $13.5M fee. It's an added incentive for clubs to develop and sell on their own players.
If you made it through all that, you're well aware that current MLS roster rules are unbelievably complicated. There's a lot more to roster rules that wasn't touched on here, and Mike Jacobs and his staff have to be well aware of these rules while constructing a roster for 2020.
The CBA negotiations may change a lot of these roster rules. SB Nation had a really nice breakdown of some of the changes the MLSPA is hoping to negotiate in the new CBA, and it could simplify some of the strange roster rules. If and when that happens, Nashville could be looking at different mechanisms for acquiring players going into 2020.