Editability settings: only the root level is configurable when the 'depth' setting of a content_taxonomy field is 0

At content taxonomy HS settings. I choose "Drop box settings" to have multiple selections.
Then choose "Editability settings" - Allow creation of new terms, I can see only 'Root' although i have 3 levels in my vocab already.
Then I select "Allow creation of new levels: and set to 3.
When I go to create node I can Add terms only to the Root level but not to sub levels. Although I can see "Create new item" on the second sub level, it doesn't create sub level term, only root term.

I'm wondering is it bug?