The salvos and ships have a green-ish colour.
I checked and I have set them on ‘neutral’ and not hostile, so maybe that is the problem. I will try it.
That is probably your problem... if they are not hostile you can't target them and your PD will not fire automatically either.
Should this be a bug report? It seems hard to think of a situation where opening fire on the incoming missiles would not be the desired behaviour 
The program is done that way if you have other NPR or factions in the same position... you will not know what ships are targeted until they impact. If you are not involved in that conflict you don't want to shoot at the missiles now do you?!? 
I think i take the "shoot them all down and let God sort it out" attitude to missiles within my FDF PD range
Maybe different rules for AMM fire, or even area fire, but FDF should shoot IMO unless the missile is allied IMO. Especially since the first indication that a newly discovered race is hostile is frequently the missile fire they send your way...
Exactly, what are the chances that a salvo a few kms away from you is not targeting your ships. Modern fighters also get a notice if they are targeted by a missile.
But there can be many scenarios you are not covering... the missiles are targeting another faction that are in the same spot or behind you and you are just in the path. If might even be fighters or FAC that you have not even detected.
Let's take another scenario... you get into a new system and meet an NPR at a planet. This NPR does not appear hostile... suddenly you have incoming missiles from another unknown NPR... now you have decision to make... will you wait and see who those missiles are targeting or not... you don't know if the two NPR is in a war with each other.
If the game flags any incoming missiles automatically as hostile you might accidentally fire AMM against a friendly faction. This is a game mechanic sort of reason why you need to make the decision if something is hostile or not... the game should not make that decision for you. A soon as you see the missiles you simply flag the race as hostile and not every missile from that race will be hostile until you flag them as neutral again.
It is semantic argument otherwise as it has to be flagged hostile at some point and all you are arguing for is if the game does it or you do. I think it is better if the player have the choice depending on the circumstances so there is no risk of accidental firing on the wrong thing.
