MLB transaction rules for dummies

A calculus class taught in Sanskrit by Mushmouth of “Fat Albert” fame — that's the only thing in the world harder to understand than baseball's transactions rules. True scientific fact!

Or not.

Sure, the rules baseball has set up to govern trades, roster construction, waiver moves and the like smack of too much bureaucracy — snaking lines at the DMV, forms signed in triplicate and all that. In reality, though, these rules serve a necessary purpose, and, despite usually being couched in lawyerly prose, they're fairly easy to understand.

Still, questions and confusion persist. So what follows, in the FAQ format that's so popular with the kids these days, is a walking tour of baseball's transaction rules. Forthwith, for the people ...

The trade deadline is July 31, but I've heard sketchy tales of trades happening after July 31. What gives?

Basically, there are two trade deadlines during the season. The first, which is July 31, is known as the nonwaiver deadline. Players traded before the July 31 deadline can be dealt without qualification or additional hurdle — i.e., they don't have to pass through waivers first.

After July 31, however, players must pass through waivers before being traded. After Aug. 31, players who are traded (after passing through waivers, of course) cannot be on any postseason roster. By extension, players traded before Aug. 31 are eligible for postseason play. Because of the waiver thing, most big trades tend do go down before the July 31 deadline, but August also has seen its share of blockbusters. Segue ...

What are these "waivers" of which you speak?

It's useful to think of waivers as "permission to make a player go away." If a team wishes to release, trade or demote a player already on the 40-man roster, then other teams must give the go-ahead. The waiver process is that "go-ahead."

For instance, if Team A wants to trade a player to Team B after the July 31 nonwaiver deadline, that player must first be offered to each team in reverse order of the standings (i.e., the worst teams have first shot at claiming the player, with teams in the same league as the player's current team having priority). These are called "trade assignment waivers."

So long as all the clubs in front of Team B pass on the player, that player can be traded without interference. If, however, a team claims the player before he falls to Team B, then Team A — the team who wanted to trade him in the first place — has a decision to make. They can pull the player off waivers and not trade him (that's why this particular waiver flavor is referred to as being "revocable") or they can work out a deal with the team that claimed him.

If no deal can be worked out with the new team, then Team A can, in essence, pull off a "force trade." That means the team that claimed the player must assume his contract and kick in $20,000 to his original team (that would be Team A). This has happened often, including last August when San Francisco claimed outfielder Cody Ross, the eventual NLCS MVP, from cost-cutting Florida.

Last August the Giants claimed OF Cody Ross, the eventual NLCS MVP, from the Marlins. Jason O. Watson

There also are three other kinds of waivers. Teams will place a player on unconditional release waivers before they cut him. Irrevocable outright waivers come into play when a team wants to remove a player from the 40-man roster but keep him within the minor-league system. If, however, another team claims him, then he's gone. Finally, optional waivers cover players with options (more to come on the subject of options) who are being dispatched back to the minors three years or more after debuting in the majors. Like trade assignment waivers, optional waivers are revocable.

So, how does free agency work?

If a player has six or more years of major-league service and has no contract for the upcoming season, then he's a free agent. In baseball, being a free agent means you're free to sell your services to any team you wish.

But that's not all there is to the process. Teams losing a highly regarded free agent can be compensated in the form of draft picks. Players have, roughly speaking, two weeks from the day after the last game of the World Series to file for free agency. Their current teams then have until Dec. 1 to decide whether to offer salary arbitration (more on that in a moment).

If a player who is classified as a Type A or Type B free agent (that is, as long as he's a player who's in the upper tier according to certain statistical measures — this winter, Albert Pujols will be a Type A free agent, while someone like Clint Barmes will be a Type B) signs with a new club, and if his old team offers him salary arbitration, then his old team receives compensation in the form of additional draft picks.

Lose a Type A free agent and you receive his new team's first-round pick and a supplemental pick between the first and second rounds. The only exception is when the signing team's first-round pick is in the top half of the round. In that instance, the team losing the free agent gets the new team's second-round pick in addition to the supplemental choice. When a team loses a Type B free agent (in other words, a free agent who's not as good as your typical Type A guy), they get only the supplemental pick.

The upshot is that playing the arbitration game is very important, especially for teams that stand to lose a handful of rated free agents. Segue ...

And how does salary arbitration work?

When a veteran player and a team can't agree upon a salary for the upcoming season, they take their dispute before an arbitration panel. Each side submits a salary figure and argues its case, and then the arbitrators must pick one or the other — there's no splitting the difference or dreaming up a third number that strikes the panel as fair. This setup prompts teams and players to submit good-faith, realistic salary figures. After all, low-balling the player or asking ownership for an absurdly high number will only result in the other side winning.

Generally speaking, players who have between three and six years of major-league experience are eligible for salary arbitration. However, there's also a notable exception called the "Super 2" player. This is a player who has between two and three years of service time, spent at least 86 days on the active roster during the previous season and ranks within the top 17 percent of players with similar service time. Super 2s, who tend to be some of the best young players in the game, are also eligible for salary arbitration.

The practical effect of salary arbitration has been to drastically increase the salaries of young players. As a consequence, you often see teams go to unusual lengths to "delay the service-time clock." For instance, Padres this season held off on promoting Anthony Rizzo for so long in part because they wanted to push back his eligibility for arbitration. In playing such games, a team can save millions of dollars.

What's with all these varying roster sizes?

Major League roster rules might seem confusing at first blush, but they really aren't. The active roster is limited to 25 players from Opening Day until Sept. 1. From Sept. 1 until Opening Day, the roster limit is 40 players.

Risky business

Not all trades benefit both sides. Check out the 10 worst deadline trades in MLB history.

On the other hand, from Opening Day through Sept. 1, the 40-man roster contains, at all times, 15 players who are not on the 25-man active roster. These 15 players are either on the 15-day disabled list or are in the minors on options (that is, after a player is first added to the 40-man roster, he can be "optioned" from the minors to the majors — and vice versa — without his consent during any three separate seasons, so long as those seasons fall within the first five years he’s in the majors). Those 15 extra players allow teams some flexibility when faced with injury, slumping players with options, or a long stretch without off days (and thus the need for a larger pitching staff).

What about the Rule 5 Draft?

One puzzling bit of transactional arcana is the Rule 5 Draft, which goes down every December at the Winter Meetings. (This is not to be confused with the Rule 5 Draft's more famous, better-looking brother, the Rule 4 Draft, or, more commonly, the First-Year Player Draft. That's the June cattle call in which players from high schools, colleges, junior colleges, and — in rare instances — independent leagues are chosen.)

After a player is drafted, his team has four or five years (depending on the player's age at the time he was chosen) to add him to the 40-man major-league roster. Players that aren't added to the 40-man within this time are eligible to be drafted in the Major League portion of the Rule 5 Draft. But here's the rub: Any team selecting a player in the Major League portion of the Rule 5 Draft must keep that player on the 25-man active roster for the balance of the next season, and they must also give the player's former team $50,000.

The exceptions to the roster rule: If the player is injured he can be placed on the DL and retained (so long as he's logged 90 days of major-league service), and if a trade for his full rights is worked out with his former organization he can be reassigned to the minors. . Some recent notable major-league Rule 5 draftees include Johan Santana, Josh Hamilton, Shane Victorino, Dan Uggla and Joakim Soria. And don't forget former AL MVP George Bell, a winter draft of Toronto from Philadelphia.

And in conclusion ...

What's the greatest baseball name ever?

Easy: Boileryard Clarke, a journeyman catcher who played in the league from 1893-1905.