New FA rules add twist to Trade Deadline strategy

May 22nd, 2017

At this time each year, baseball observers commence the ritual of separating the sport into "buyers" and "sellers" ahead of the non-waiver Trade Deadline.
In 2017, additional terminology is required. Major League Baseball's new Collective Bargaining Agreement has transformed the selling side of the equation, because Draft-pick compensation now varies according to a team's economic circumstances.
If you followed last offseason's labor negotiations, you might've heard teams no longer will receive compensatory Draft picks between the first and second rounds. Indeed, that is true in many cases. But not every team.
For a selection to be awarded between the first round and Competitive Balance Round A of the 2018 MLB Draft, three conditions must be met:
1. The team that loses the free agent is a revenue-sharing recipient, based on its revenues and market size. (Under MLB rules, teams from many larger markets are disqualified for revenue sharing.)
2. The free agent rejects a qualifying offer during a 10-day period after the World Series.
3. The amount of guaranteed money in the player's new, free-agent contract is at least $50 million.
According to industry sources, 16 of Major League Baseball's 30 clubs currently meet the first of those qualifications: alphabetically, the Arizona Diamondbacks, Atlanta Braves, Baltimore Orioles, Cincinnati Reds, Cleveland Indians, Colorado Rockies, Houston Astros, Kansas City Royals, Miami Marlins, Milwaukee Brewers, Minnesota Twins, Oakland Athletics, Pittsburgh Pirates, San Diego Padres, Seattle Mariners and Tampa Bay Rays.
That's relevant to the trade market, because general managers of those teams can (theoretically) retreat to the classic late July rejoinder: "I'm not trading my star for your B-level prospect. I'll make the qualifying offer in November and collect my Draft pick after the first round." (For a full breakdown of the qualifying offer rules, click here.)
Let's pause to consider the Royals, who have the American League's worst record and multiple core players eligible for free agency at season's end: center fielder , third baseman Mike Moustakas, first baseman , shortstop and left-hander , who is second in the AL with a 2.03 ERA.
Rival executives expect Royals general manager Dayton Moore to make that group available via trade in July, barring a dramatic turnaround. For Kansas City, the value of retaining those players -- and collecting Draft picks -- will fluctuate based on multiple real-time variables:
1. How is the player performing?
2. How are the 29 other teams likely to value him in free agency? (That depends in part -- but not entirely -- on the answer to the first question.)
3. How inclined is the player to accept the qualifying offer?
4. Do the Royals want him to accept the qualifying offer? (Last offseason, that meant a one-year salary of $17.2 million.)
One new factor must be baked into those free-agent projections: Beginning this offseason, teams no longer will lose first-round Draft picks for signing a "qualifying offer" free agent. That could boost salaries in some cases.
Moore must constantly calibrate where prospective free agents stand relative to the $50 million threshold, because that determines the quality of his fallback option in trade talks. If Vargas signs for less than $50 million after rejecting the qualifying offer, Kansas City will receive a selection following Competitive Balance Round B, which follows the second round rather than after the first.
Incidentally, that same collection of picks -- wedged between Competitive Balance Round B and the start of the third round -- also is where teams receive compensatory selections if they are (a) "payor clubs" in the revenue sharing program and/or (b) disqualified from receiving revenue sharing based on market size. That describes the 14 MLB clubs not listed above … except those matching one additional criterion.
Any team with a payroll exceeding the Competitive Balance Tax threshold of $195 million will receive its compensatory selections after the fourth round in all cases . And the Los Angeles Dodgers, Boston Red Sox, New York Yankees and Detroit Tigers have payrolls at or above $200 million this year, according to the salary database at
The Royals' CBA-related concerns probably won't apply to the Dodgers, Red Sox and Yankees, who project as Trade Deadline buyers. But at 21-23, the Tigers aren't as likely to add aggressively in July, especially after the offseason roster reconstruction that never happened.
Consider the case of J.D. Martinez, who has been arguably the planet's hottest hitter since returning from the disabled list a little more than one week ago. He will be eligible for free agency in November. And if Detroit's payroll ends the season at or above $195 million, the best it can get in return from Martinez -- should he reject a qualifying offer and sign elsewhere -- is a pick after the fourth round.
So barring a change to the team's payroll structure, general manager Al Avila can't tell his counterparts that he's prepared to hold onto Martinez for the purpose of collecting a high pick in the 2018 MLB Draft. The Tigers' payroll is too large for him to do so. And that is yet another consideration at Trade Deadline 2017 that never mattered much before.