Six "Competitive Balance" Rule 4 Draft slots between the 1st and 2nd rounds and six more between the 2nd and 3rd rounds are awarded each year by lottery.
The Competitive Balance Lottery (CBL) is held during the week following the Rule 4 Draft signing deadline in July. Only MLB clubs that receive revenue sharing and clubs from the ten smallest markets are eligible to participate in the lottery for the CBL draft slots.
Once awarded, a CBL draft slot can be traded, but only during the MLB regular season. The slot cannot be traded for cash unless it is a financial adjustment made to offset the salary of one or more of the players involved in the trade. Also, a CBL draft slot can be traded only once (only by the club that was awarded the pick). Once traded, the slot cannot be "flipped" to a third club.
If a player selected with a CBL draft pick does not sign, the club receives a compensation selection in the next Rule 4 Draft, one slot lower than where the club selected the previous season. There is no further compensation if a player selected with a Competitive Balance compensation draft pick does not sign.