Yes, this is working as designed, but the term "starting person" is very easy to misunderstand (because it is a very confusing choice of terminology).

For a long time, there has been a feature in Account Settings where you can specify the "Family Tree Starting Person," which is described as "This person appears in the root position when I open Family Tree." That is simply a display option. I might be focusing on my maternal grandfather's line, so I could choose to set him as the Family Tree Starting Person, and then my tree views would start with him as the focus person.

But for a Family Group Tree (FGT), the concept of "Starting Person" is quite different. It is not just a "starting" person, but you are actually claiming to be that person. Each living person profile in a FGT can have a user associated with them (not all living profiles have to have a user associated, but only one user can be associated with a particular profile). When you said that your starting person was your grandniece, you were saying that you are claiming that you are actually that person. Since you claimed to be your grandniece, the system trusts that you are that person, and so you can do things that your grandniece could do, such as reserving ordinances for her father.

Selecting a person as your FGT starting person does have the effect of setting that person as the focus person for your tree views, just like the Family Tree Starting Person set in Account Settings. But it also has that very significant effect of you claiming to be that person. Because of this, you should never set your starting person in a FGT to anyone other than the person in the FGT who represents you. This is explained in the help article How do I set the starting person in a Family Group Tree? If you choose anyone else, you will confuse yourself, as well as other group members who interact with you in the FGT.

I really wish that FamilySearch had chosen a different term for the person you are claiming to be in the FGT, to avoid this confusion that very understandably affects many users of FGTs.