How to reproduce:
1. Open attached project "CreateChildInPrefabMode.zip"
2. In Project window, open "Assets" -> "Parent" prefab
3. In Hierarchy window, highlight "Child2" object
4. In Hierarchy window, press on "Create" -> "Create Empty Child"
5. Observe newly created child position in the hierarchy

Expected result: the newly created object is a child of "Child2" object
Actual result: the newly created object is a child of "Parent" object

Reproducible with: 2018.4.9f1, 2019.2.7f2, 2019.3.0b4, 2020.1.0a5
Could not test with 2017.4 (old prefab system)