Sydney chief executive Andrew Ireland was left baffled after the AFL banned the Swans from trading until the end of the 2016 season, unless they abandon the cost of living allowance (COLA).

The league edict also stops Sydney from signing up any restricted or unrestricted free agents for the 2015 or 2016 seasons.

COLA is currently being phased out and will be replaced by a rent subsidy in the 2017 season.

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The league released a statement on Thursday, confirming the AFL Commission had informed the Swans they must only use the “transition amount to honour existing contracts”.

“And not to attract players from other clubs or use that transitional amount to compete with other clubs for the services of players not on their list,” it said.

Ireland said the Swans were “very disappointed” and would continue to discuss the restrictions with administrators.

“We don’t understand why the AFL has made this rule specifically for us considering we’ve complied with their rules,” Ireland said.

“While we wholeheartedly believe players should receive the cost of living allowance due to the higher cost of living in Sydney, it was ultimately the AFL’s rule.

“It wasn’t optional and therefore we included it in every player’s contract.

“It doesn’t make any sense that we’re being punished for something that we’ve been told to do.

“It also doesn’t seem fair that we can lose players yet we’re unable to replace them.”

Greater Western Sydney, who are seeking to recruit disgruntled Western Bulldogs captain Ryan Griffen, are exempt from the crackdown.

“Due to its TPP (total player payment) position, list structure and contractual commitments … (GWS will) be permitted to retain the COLA levels at $800,000 for the 2015 year and $600,000 for the 2016 year,” the AFL explained.

“With no restriction on any players coming into the club during the AFL exchange period.”

The Swans have recruited superstar forwards Lance Franklin and Kurt Tippett during the past two seasons.