Starting with AF 2016 R2 there is a new concept for notifications. What is your notifications server version? The screenshot you have attached is dedicated to create legacy notifications - is that your intention? The new notifications are defined in a dedicated tab "Notification Rules" which is available under Elements and Element Templates. If you miss that tab, you may have to update your AF client.
If you intend to create legacy notifications: is the notification service running? Check the notification service in PSE with Notification tab selected in the left-bottom Navigator and select Tools -> Notification Settings -> Global Configuration.