The Rule 4 Draft is the official term for the First-Year Player Draft, an amateur draft held annually in early June. Players must be a resident of the United States (U.S. territories, such as Puerto Rico, apply) or Canada to be eligible for the draft. Players who have graduated high school but not attended college are eligible for the draft, as are those who have completed at least one year of junior college. Players attending four-year colleges are eligible to be drafted upon completing their junior year or turning 21 years old.
Each pick in the first 10 rounds of the Draft has an assigned value, and the total for each of a club's selections equals what it can spend on signing bonuses for players selected in those rounds without incurring a penalty.
If a player selected in the first 10 rounds doesn't sign, his pick's value is subtracted from his club's pool. If a team exceeds its allotment, it faces a penalty.
A team that outspends its pool by 0-5 percent pays a 75 percent tax on the overage. At higher thresholds, clubs lose future picks: a first-rounder and a 75 percent tax for surpassing their pool by more than 5 and up to 10 percent; a first- and a second-rounder and a 100 percent tax for more than 10 and up to 15 percent; and two first-rounders and a 100 percent tax for more than 15 percent.
The Dodgers selected Clayton Kershaw, from Highland Park High School in Texas, with the seventh overall pick in the 2006 Rule 4 Draft. The Nationals selected Stephen Strasburg, a junior out of San Diego State University, with the No. 1 overall pick in 2009. With the first overall selection in 2012, the Astros took Carlos Correa out of the Puerto Rico Baseball Academy.