The Rule 5 Draft occurs each year, and the player pool is limited to certain minor leaguers that were not added to their respective organization’s 40-man roster before its deadline (see below). The Draft contains two phases: Major League and Triple-A.

For the Major League Phase, once a player is drafted, he must be added to the new organization’s 26-man active roster immediately and the drafting team must send $100,000 to the player’s original team. If the new team wishes to remove the player from the active roster in the duration of the subsequent season, it must place the player on waivers. If the player remains unclaimed, the team must offer the player back to his original team for $50,000. If the original team declines the offer, then the team that drafted the player in the Rule 5 Draft may assign him to the minors.

For the Triple-A Phase, the selected player is not subject to roster limitations in the new organization. Selections in this phase only cost selecting teams $24,500 to the player’s old team.

The draft order is determined by the reverse order of the previous season’s standings and team can only make as many selections as unfilled spots exist on their 40-man roster (for the Major League Phase) or 38-man AAA roster (for the Triple-A Phase). Teams can opt out of making a selection.

Deadlines for players to be added to the 40-man roster:

1) Players who originally signed into an MLB organization at 19 years old or older must be added to their organization’s 40-man roster within four seasons.

2) Players who originally signed into an MLB organization at 18 years old or younger must be added to their organization’s 40-man roster within five seasons.