The Association for Financial Markets in Europe (AFME) banking lobby and the Investment Association (IA), which represent asset managers, said in a statement the London Stock Exchange trading day should be cut by 90 minutes to seven hours.
They proposed two options, for the day to run between 0900 and 1600 UK time, or from 0930 to 1630 UK time.
"AFME and the IA would also support a 12-month pilot across all major European exchanges and trading venues in order to test market structure benefits and impacts," they added.
It is unclear if all of Europe's main bourses would agree to cutting trading hours, given concerns that business could end up moving to Asia or the United States, with which their existing hours overlap.
AFME and the IA made the proposal in their formal response to a public consultation by the LSE on cutting trading hours.
Shortening the trading day from 8.5 hours would mean trades being more evenly distributed to cut costs for investors, which rise when liquidity is thin, and prevent transactions bunching up in the last 2.5 hours, the trade bodies said.
"For comparison, the U.S. market has shorter trading hours but six times the turnover, with an overall much lower cost of trading across the day, demonstrating greater stability in liquidity conditions across the whole trading day."
The Japanese market is open for six hours, but with a one-hour lunch break.
Cboe Europe, the region's biggest cross-border share trading platform, said it would make sense to start later as the start of the session does not overlap with Wall Street.
AFME said adjusting market hours is a first step towards further improving diversity in the financial sector, AFME.
Trading remains one of the areas of financial services where staff face significant mental health issues, with excessively long hours contributing to the problem, AFME and IA said.
By Huw Jones