A trade exception is when you get from the NBA a sort of like the ability to go past the rules from the Collective Bargaining Agreement. If you are over the salary cap (if the salaries are more than 49 million dollars), you might have a exception. The mid-level exception of Houston is worth 5.6 million dollars, which is a salary that can be given to a player, who is a free agent.

The trade exception expires, but not in NBA Live, I think.