The 2016-17 IFA Period Opens Today, Which Could Spark Trade Activity

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The 2016-17 IFA Period Opens Today, Which Could Spark Trade Activity

Chicago Cubs

latin americaIn recent years past – specifically 2013 and 2015 – July 2 was a supremely anticipated date for Chicago Cubs fans, as it signaled the open of an International Free Agency (IFA) period in which the Cubs were expected to spend heavily. This year? Well, I’m posting about it for essentially the first time on the very day the period opens. In other words: not so supremely anticipated this year. I’ll explain why, if you didn’t already know.

The IFA period is kind of like the draft for international players, though they are (1) not drafted, and (2) typically much younger than stateside draft prospects. Usually, you see pre-arranged deals for 16 and 17-year-old Dominican or Venezuelan players executed on July 2, and organizations get a boost of young prospects who might not otherwise land on our “hey-they’re-doing-incredible-things-in-the-minor-leagues” radars for a few years. For example, two of the Cubs’ best prospects, shortstop Gleyber Torres and outfielder Eloy Jimenez, were big-time signings for the Cubs at this time back in 2013.

That is all to say, this process is a bit long and drawn out, but is critically important to an organization’s health. And it kicks off today.

For the Cubs, however, it’s going to be different than those years past, because they’re in the penalty box. That means there are significant limitations on what the Cubs can do during the next two IFA periods. That doesn’t mean, however, that they won’t still sign a number of interesting prospects, and it also doesn’t mean they might not be involved in some trades related to the period.

Some primer information …

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 until the next July 2, and it starts all over again).

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). This year, because the Cubs exceeded their pool by a huge amount in the last period, they are subject to the harshest penalty: a prohibition on signing any player for more than $300,000 during the next two IFA periods. The biggest stars in the class will all receive bonuses in excess of $300,000, so the Cubs will not be able to sign them. That said, plenty of quality prospects were signed for $300,000 or less in recent years. There is plenty of talent for the Cubs to accumulate.

The Cubs do still get to use their whole bonus pool, too. This year, by virtue of finishing with the third best record in 2015, the Cubs have the third smallest bonus pool: $2,063,100. (Also, certain smaller signings do not count against the pool, so it pays to dig deep on scouting when you can’t sign the biggest stars.)

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: $563,700, $380,700, $257,100, and $161,600.

You can see all of the slots for every team here at Baseball America.

It’s conceivable that the Cubs could trade away a slot or two, since they might not be able to utilize it all this year. The Cubs could trade those slots to a team that is going over their pool, subjecting them to a 100% overage tax, which means 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 on whether they will be shopping their bonus slots, or if they’ve already got several $300,000ish deals lined up and need their entire pool.

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. Indeed, there are a ton of reports around baseball about big-time signings (remember Lazarito? He finally signed, getting $3 million from the A’s (seems like he may have been overhyped a bit)).

Author: Brett Taylor

Brett Taylor is the Editor and Lead Cubs Writer at Bleacher Nation, and you can find him on Twitter at @BleacherNation and @Brett_A_Taylor.