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MLB Draft Rules Primer

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I thought it a good idea to begin a thread with the goal of answering the inevitable questions that arise about the rules of the draft and the compensation therein. Please note that I colored two sections that are -in my view- important in their respective understanding. If you have any other questions, please post them here. :)

From Wikipedia...

The First-Year Player Draft, also known as the Rule 4 Draft, is Major League Baseball's primary mechanism for assigning amateur baseball players, from high schools, colleges, and other amateur baseball clubs, to its teams. The draft order is determined based on the previous season's standings, with the team possessing the worst record receiving the first pick. In addition, teams which lost free agents in the previous off-season may be awarded "compensatory" picks.
Compensatory picks

Teams can earn Compensatory picks in the draft based on departing free agents. Free Agents are ranked by the Elias Sports Bureau based on their previous two years of playing, and against players of similar positions. Players are categorized as either Class A or Class B, or they fall into the category of all other players. Below is a description of each free agent class and the compensation the free agent's former team received when the player signs with a different team.

• A Class A free agent is ranked in the top 20 percent of players at his position. A team that signs a Type A player gives its top draft pick to the club that the player is leaving; that club also receives a supplemental pick in the "sandwich" round between the first and second rounds.

• A Class B free agent is ranked below the top 20 percent but in the top 40 percent of players at his position. A team that loses a Type B player receives a supplemental pick, but the signing team does not lose a pick.

• All other players, who carry no compensation at all. There had previously been a third class of "Type C" players, but that was eliminated in the most recent CBA.

To earn a compensatory pick, a free agent must either be signed before the arbitration deadline in early December, or be offered arbitration by their former team but still sign with someone else.

Compensatory picks that one team gives another via this method are the highest available pick that team has, except that a top-15 pick cannot be lost. If a team owes two other teams draft picks via Type A free agents, the team whose departing player had a higher score gets the higher ranked pick. A team cannot lose picks it has earned via compensation. Also, the first 15 picks in the draft cannot be lost via compensation, so a team that is in that rank would give up their second round pick.

The order of the supplemental round between the first and second rounds is determined by inverse order of the previous year's standings. All the Type A picks are done first, and then the order resets for all the Type B compensation picks.

Teams can also earn compensation for unsigned picks from the previous year's draft. If a team doesn't sign a first or second round pick, they will get to pick at the same slot plus one the following year. For example, if the team with the #5 pick does not sign that player, they would have the #6 pick the following year. The regular draft order would continue around those picks. For compensation for not signing a third round pick, teams would get a pick in a supplemental round between the third and fourth rounds. If a team fails to sign a player with one of these compensated picks, there is no compensation the following year.

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