Useless trivia information: The blade that Sephiroth wields is a No-Dachi, a Japanese blade similar in shape to the katana and wakizashi that were carried by the samurai at all times. The No-Dachi was an extremely long blade, around six feet if memory serves, and required a great deal of strength to wield.

Sephiroth tucks it in his belt, as Big D says, like Cloud carries his sword upon his back. They just don't show it there when you are walking around. Neither of them use a sheathe though, they tuck it into a strap of some sort instead.