Two years ago on July 2, the Chicago Cubs had a busy trade day:
- They sent Scott Feldman and Steve Clevenger to the Orioles for Jake Arrieta, Pedro Strop, and an international bonus slot.
- They sent Carlos Marmol (and an IFA bonus slot) to the Dodgers for Matt Guerrier.
- They sent Ronald Torreyes to the Astros for an IFA bonus slot.
Sensing a theme? You’ll notice that, in each trade, an IFA bonus slot was involved, and that wasn’t a coincidence – annually, July 2nd marks the open of the new international free agency period, and deals like those above can be consummated. They often are by teams looking to be aggressive in international free agency, and that was the other thing the Cubs did on that very busy day: they agreed to sign a bunch of top prospects.
Outside of a Trade Deadline or a draft day, it was the most feverish I can remember being while trying to keep up with the news for hours and hours.
None of that is to say that tomorrow, July 2, 2015, will have the same crazy pace, but it’s possible. The Cubs are once again rumored to be aggressive in international free agency, and we could see some pool slots moved by the Cubs, to the Cubs, and/or around the league.
If you missed yesterday’s latest set of IFA rumors for the Cubs, catch up here.
Otherwise, here’s your primer on the period that opens tomorrow:
The IFA Period
International free agency is the process by which teams can sign amateur talent from countries not subject to the draft in the United States (pretty much anywhere outside of USA (including Puerto Rico) and Canada). Typically, the best talents are signed in the first signing period in which they become eligible, at age 16. A recent influx of slightly older Cuban talent would be the primary exception.
Each year, the IFA period opens on July 2, and runs through mid-June of the next year (then there’s a brief quiet period).
IFA Bonus Pools
Beginning in 2012, MLB teams were given a bonus pool (made up of four “slots” – though the slots needn’t be spent as chunks) they could use to sign international prospects, and, if they exceeded the pool, they would be subject to penalties (not unlike in the draft). Last year, because the Cubs exceeded their pool by a huge amount the year before, they were subjected to the harshest penalties at the time: a 100% tax on the overage, and a prohibition on signing any players for more than $250,000.
Those penalties have now expired, and the Cubs are free to spend their $3,230,700 bonus pool however they see fit – indeed, they are expected to exceed that pool significantly. If they do so, they’ll be subject to the current harshest penalties: a 100% tax on the overage, and a prohibition on signing any players for more than $300,000 in the next two IFA periods.
Trading IFA Bonus Slots
Since teams are not required to spend their four bonus pool slots in chunks, you might wonder: why do they even exist? Well, that’s because they can be traded. A team may acquire up to 50% of its original pool by trading for those slots (for example, a team with a total pool of $3 million could acquire another $1.5 million in slot value via trade).
The Cubs’ four slots are worth as follows: $1,527,700, $472,700, $319,200, and $211,100.
It’s conceivable that the Cubs could trade away a slot or two, since they’re going over their pool anyway. But it’s more likely that the Cubs will use fringe prospects to acquire pool slots – since they’re going over their pool, subjecting them to a 100% overage tax, any “dollar” they pick up in pool space will translate to an actual dollar in tax savings. In essence, it’s a way of selling superfluous players and prospects to teams that aren’t going to use their pool space anyway.
Valuing IFA Bonus Slots
How much are these international slots worth? Well, the Cubs helped set that value in 2013 when they traded infield prospect Ronald Torreyes to the Astros for just about $800,000 in IFA pool space. At the time, Torreyes was a borderline top 20 prospect in the Cubs’ system, but he was struggling a bit and was squeezed out of the upper level infield picture. Still, it was a nice get for the Astros for a bonus pool slot they weren’t going to use.
Typically, IFA slots have been included as extra additions to larger trades (making them tough to value), or used in the kind of selling-a-fringe-player described above. That is to say, the value of the slots doesn’t seem to be significant.
Will Trades Happen This Week?
Oh, probably some. We don’t have a ton of history upon which to draw here, but I suspect there will be at least some activity around baseball this week tied to the open of the IFA period. Will it involve the Cubs? It probably depends more on whether there are sellers willing to sell this year this early (the Cubs were in something of a unique situation each of the last two years when they sold very early).
Even if there aren’t trades, there should be a flurry of reports on international free agents agreeing to deals – after all, that’s what the IFA period is about.
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