Held each December, on the final day of the MLB Winter Meetings, the Rule 5 Draft allows clubs who do not have a full 40-man roster to acquire certain non-40-man roster players from other clubs.
Players signed at age 18 or younger need to be added, or “protected”, to their club’s 40-Man roster within five seasons, or they will be eligible for the Rule 5 draft. Players signed at age 19 or older need to be added within four seasons.
“Protecting” a player means a team will add that prospect to their 40-man roster, even if that player may not be fully developed yet. This is to prevent another team from selecting him. Teams must carefully decide which players they want to protect versus which ones remain off of the 40-man roster, and thus become available to be taken by other teams.
The draft order for the Rule 5 Draft is determined based on the previous championship season’s final regular season standings. The team with the worst record from the prior season picks first.
Major League Phase
There are two phases of the Rule 5 Draft. The first is the Major League Phase, where players acquired must immediately be added to that team’s 26-man MLB Roster.
Unlike the MLB First-Year Player Draft, not every club is obligated to make a selection. Those that do pick a player, however, must pay $100,000 to the club from which the player was selected.
Rule 5 Draft picks are assigned directly to the drafting club’s 26-man roster and must remain on this roster for the entire season. For the acquiring team to remove the player from the MLB roster, he must be placed on outright waivers.
Should the player clear waivers, he must be offered back to his previous team for $50,000 and can be outrighted to the Minors only if his original club does not wish to re-acquire him.
Clubs may trade a player selected in the Rule 5 Draft, but the same restrictions will apply to the player’s new organization. However, a club may also work out a trade with the Rule 5 pick’s original club to acquire his full rights, thereby allowing him to be optioned to the Minors under traditional circumstances.
Minor League Phase
The second phase is the Minor League Phase. Minor league players who fit the criteria mentioned above and are not on a current AAA roster can be added to a new team’s minor league farm system.
Any player who is on the 38-player Triple-A roster is protected from being picked in the minor league Rule 5 draft. Organizations pay the player’s current club $24,500, and then the player is immediately a member of the acquiring teams’ AAA team.
Summary
MLB organizations use the Rule 5 Draft mainly for two purposes. The first is to add impact talent to their current MLB Roster to fill a gap, or just to help them win games immediately.
The second purpose would be to acquire highly talented, young prospects and add them to their farm system in a very low-cost manner compared to alternative acquisition methods, such as trades or free agency.
This draft also provides an excellent opportunity for young players who may find themselves blocked positionally by an MLB Superstar, so they haven’t gotten their chance to shine yet. By being taken by a different team in the Rule 5 draft, that player is guaranteed to make the MLB Roster and contribute or develop immediately in the big leagues.
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