How does platform entry affect welfare in the presence of direct network effects? We develop a Cournot framework with novel market-clearing conditions that ensure the existence of a multi-firm, asymmetric sorting equilibrium and establish uniqueness in special cases. The model shows that entry can reduce total surplus by inducing fragmentation. Empirically, we study the US equity ETF market, where network effects, sizes, and prices manifest as liquidity, trading volume, and expense ratios. We estimate an investor demand model using authorized participants’ involvement in the Federal Reserve’s SMCFF program as instruments for ETF liquidity. Our next step is to integrate these components into a quantitative analysis to address the welfare implications of entry.