Two possibilities. It could be a pressure side cleaner but there should be a corresponding port in the pool somewhere. Plus, when the pump turns on, it shouldn't really affect the water level in the pipe.
However, because the water level did change, it could also be a vacuum release for the main drain. In the days before SVRS systems, plumbers would sometimes plumb in a vent pipe that went to the bottom of the pool and connected to the main drain so if the main drain were to get blocked the pump would start sucking air and release the vacuum. But normally, you would see the water level drop in the pipe by a couple of feet. Do you have a main drain and is it fully on (via a pad valve)? It looks like the small pipe is right by one of the suction pipes so this could be a possibility. If it is leaking because the water level is high, then I would just add a section of pipe with a coupler to make it higher.