I believe you're confusing Squad Arena and Grand Arena Championship.
Squad Arena is as you described. When you start the game, 'a shard' is made of players that started at a similar time as you, and this is who you play.
Grand Arena Championship is a ladder system with promotions and demotions. You play the nearest 7 people to you on the ladder, no matter the size of their rosters.
This last bit is 'sort of' what the OP is complaining about..................I guess, but it's not that easy to follow nor is it at all constructive. A well thought out topic sentence, idea to fix the issue/issues (that's also unclear) and a conclusion would have helped the OP's post greatly.