I'd've thought that one of the points of having a local sports team (whether it be football, tennis, or whatever) is to show how well the locals can play that sport.
Trading players to other teams would seem to defeat that point; after all, what's the use of cheering for, say, your city's team if only one of the players is actually from that city? That would seem to defeat the purpose of team loyalty to me. You might be cheering one some of the same players that you were booing out last season, because they were on the rival city's team.
The immediate result would seem to be that the success of a team is determined less by how well people in a given city play the sport and/or how well they can train others, but by how much money the local team has to buy top athletes.