Is the frame of my bike to small?

The frame is on the small side, but your saddle position relative to the height of the handlebars is not all that bad. If your saddle is properly positioned, it would be normal for your thigh to be pretty close to horizontal when you are at the top of your pedal stroke. Frame size would not change this in any way, because no matter what size frame you have, the saddle has to be in the same position relative to the pedals